Mexican Relations

1ac mexican relations

Transboundary agreement is critical to guarantee a new era of Mexican relations
Martin* and Wood**, 13 *director of the Energy Program at the Institute of the Americas at
the University of California, San Diego AND **director of the Meico Institute at the !oodro"
!ilson International Center for Scholars# $e "or%ed as a &rofessor for '( years in Meico and
&reviously "as director of the International )elations Program at the Instituto *ecnol+gico
Aut+nomo de M,ico -.eremy Martin, , /010'1, 2U#S# Should Act 3uic%ly on *rans4oundary
$ydrocar4on Agreement !ith Meico5,
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:esterday, U#S# President ;arac% <4ama and Meican President Enri=ue Pena Nieto met in Meico City to discuss the
4ilateral relationshi&# It "as <4ama>s first meeting "ith Pena Nieto since the latter too% office in Decem4er, although the
t"o did meet "hen Pena Nieto visited !ashington as &resident?elect in Novem4er# In star% contrast to meetings 4et"een the
American and Meican &residents in recent years, the agenda included 4ut "as not dominated 4y security and organi@ed crime#
Instead, as underscored 4y the &residents> Aoint &ress conference, <4ama>s visit to Meico City offered a varied menu of issues such
as trade, education, innovation, North American com&etitiveness and energy# <n this last issue, it is li%ely that the Meican
&resident in=uired a4out the status of the *rans4oundary $ydrocar4ons Agreement, signed "ith
much fanfare in Bos Ca4os in Ce4ruary 7D'7# *he agreement creates a frame"or% for resolving the thorny
issue of o"nershi& of oil and gas reserves that eist acrossEor rather underneathEthe international
4order 4et"een Meico and the U#S# in the Fulf of Meico# *his &ro&osed frame"or% "ould &ut to rest long?
standing Meican fears of the 2efecto &o&ote,5 or stra" effectEthe idea that U#S# com&anies aim to slur& u&
Meican oil reserves from across the nations> maritime 4order# *he 7D'7 agreement mar%ed a maAor shift 4y &roviding legal
certainty for e&loration and &roduction activities near the 4order, and 4y allo"ing for the &ros&ect of long?&rohi4ited Aoint
develo&ment of reserves that straddle the Fulf "aters of 4oth countries# At its core, the agreement see%s to set u& legal guidelines for
com&anies to Aointly develo& so?called trans4oundary reservoirs and lift the moratorium on oil and gas e&loration and &roduction
for roughly '#/ million acres in the Fulf# Meico underscored its commitment to the agreement 4y =uic%ly
ratifying itG the Meican Senate a&&roved the treaty in A&ril 7D'7# In the United States, mean"hile, &rogress stalled
for more than a year# ;ut Aust in time for yesterday>s 4ilateral meeting, the agreement is again under discussion as legislators
revive the dormant ratification &rocess, "hich is good ne"s for those eager to see its a&&roval in the U#S# Indeed, according to the
!hite $ouse, <4ama s&o%e in &ositive terms yesterday a4out the recent &rogress made on the agreement6 ;oth the $ouse
Su4committee on !estern $emis&here Affairs and the $ouse Committee on Natural )esources recently held hearings focused on
the challenges and o&&ortunities that a&&roval of the accord "ould &resent for the United States# <n A&ril 'H, a 4ill "as introduced
in the $ouse of )e&resentatives that "ould ma%e "ay for the a&&roval and im&lementation of the terms of the agreement# *hese are
all &ositive ste&s, and their &rogress "ill 4e monitored closely 4y U#S# and international o4servers, es&ecially Meico# ;ut it 4ears
underscoring that further delay in U#S# ado&tion of the agreement ma%es little sense# *he agreement is not an overly &olari@ing issue
domestically6 in fact, =uite the o&&osite# Several la"ma%ers have descri4ed it as a "in?"in for 4oth Meico and the
U#S# As the U#S# Congress de4ates the deal, it is "orth revisiting the four %ey reasons the agreement merits an e&editious a&&roval
in the coming "ee%s# Cirst, approval of the deal in the U#S# "ould 4e an im&ortant sign of 4ilateral
concord , &articularly at the outset of a ne" administration in Meico and a second term for
<4ama# *his is im&ortant, as it underscores the t"o nationsI increasing a4ility to "or% together and conclude com&licated
agreementsEand coo&erationEon 4inational issues unrelated to immigration or crime and drugs# Second, this agreement ma%es
clear that 4oth nations are %eenly a"are of the energy &otential of the Fulf, &articularly along the
maritime 4order# ;ut it also firmly esta4lishes the issue of increased regulation and standards for drilling in a 4ilateral
agreement# Since the A&ril 7D'D Macondo accident, the largest oil s&ill in U#S# history, the U#S# has 4een more concerned "ith
drilling safety not Aust in the U#S# 4ut also in neigh4oring countries around the Fulf such as Cu4a and Meico# *his agreement
formali@es interaction in terms of regulation and any res&onses to incidents along the maritime
4order# *hird, then?Secretary of State $illary Clinton "as correct to em&hasi@e the commercial o&&ortunity and energy security
element of the accord "hen it "as first announced# *he agreement &rovides the &ossi4ility for U#S# firms to Aoin
"ith Meico>s national oil com&any, Peme, to e&loit dee&?"ater oil resources in the Fulf of Meico
along the countriesI maritime 4oundaries# *his could &rovide im&ortant o&&ortunities for U#S# com&anies, including eciting Aoint
venture o&&ortunities "ith Peme long thought im&ossi4le# Cinally, the agreement is relevant and "orthy of attention in 4oth the
U#S# and Meico 4ecause of the im&ortant role of Meican oil in the U#S# energy security e=uation, and the im&ortance of the U#S#
mar%et for Meican oil e&orts and revenue# During her remar%s at the signing ceremony, Clinton called the agreement &art of a
commitment to im&rove energy security for 4oth countries and to ensure safe, efficient, res&onsi4le e&loration of the oil and gas
reservoirs in the Fulf of Meico# *his last &oint has echoed throughout the congressional hearings on the to&ic, "hile mem4ers of
Congress from 4oth &arties and from across the country have focused on the im&ortance of colla4oration "ith our neigh4ors, shared
technology and the o&&ortunity to 4oost energy security on 4oth sides of the 4order# *he &resident>s visit to Meico and the
accom&anying surge in interest in the agreement &rovide the necessary momentum to facilitate &assage of the 4ill and ta%e the
critical first ste&s to"ard im&lementation# !aiting any longer to do so merely delays the many 4enefits the
agreement has to offer and sends the "rong signal a4out the need for the U#S# and Meico to "or%
together in the Fulf of Meico, and on energy issues more generally#
Action now is critical to broader Mexican relations and access to oil
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meicos?hydrocar4ons?sector0900EM
A =uic% res&onse 4y the U#S# government could mean American com&anies could access
Meico>s vast hydrocar4on resources, "hich loo% li%e they could 4e o&ening u& than%s to reform &ro&osals from
Meico>s governing Institutional )evolutionary Party -P)I9# Meico, according to an article from the smart&lanet#com "e4site
and other sources, o"ns 2a gold mine of oil 5G ho"ever, country>s state?o"ned hydrocar4on mono&oly Petr+leos
Meicanos -PEMEL9 has a heavy ta 4urden, and doesn>t have the infrastructure or technology needed to etract it# President
Enri=ue PeMa Nieto>s &ro&osed reforms, "hile %ee&ing PEMEL a state?o"ned com&any, "ould allo" foreign investment and limited
&artici&ation in the oil industry 4ut "ould still ensure that oil "ould remain in Meican hands# In A&ril of 7D'7, then Secretary
of State $illary Clinton made an agreement "ith former &resident Celi&e Calder+n allo"ing Aoint oil
e&loration in the Fulf of Meico, "hich "ould give the U#S# access to Meico>s "ell?%no"n oil
riches# Interestingly, "hile the deal "as a&&roved "ith lightning s&eed in the Meican Senate -"here o&&osition to &rivati@ation is
=uite strong9, the current <4ama administration in the United States has delayed finali@ing the off?shore drilling deal# According to
)e&u4lican la"ma%ers and industry e&erts, a !uic" response is essential and foot#dragging could
$ave disastrous conse!uences for Americans interested in accessing Mexican oil #
*he reason "hy conse=uences could 4e disastrous according to industry e&erts is that Meico could very easily
change its mind and call off the deal 6 &u4lic o&inion on any foreign investment in the country>s
hydrocar4ons sector generally tends to 4e negative and &oliticians could very "ell su4mit to the
"ill of the &o&ulace# )e&# .eff Duncan -)?S#C#9 s&o%e to *he $ill recently after a $ouse Coreign )elations committee
hearing# S&ea%ing a4out energy deals "ith Meico, he said6 2It>s time for the administration to act# All they have to do is send the
enacting legislation over here and let us act on it, 4ecause "e>re sitting on Ngo#>5 %f action by t$e &'(' government
is not prompt , as mentioned a4ove, Mexico may cancel t$e deal' Meico, for decades, has 4een
totally closed to foreign investments and the *rans4oundary $ydrocar4ons Agreement, "hich "as negotiated 4y
Clinton and Calder+n last A&ril, offers U#S# investors a foot in the door # According to e&erts, if action isn>t
ta%en 4y .une or .uly of this year, Americans could very "ell lose the o&&ortunity to invest in
Meico>s oil industry forever if the &ro&osed PEMEL reforms do not go through# <ne of the reasons that my hinder a
&rom&t res&onse from the United States government is that the administration is deciding "hether to consider the agreement as a
treaty, "hich "ould re=uire the a&&roval of the Senate, or as a sim&le agreement, "hich "ould only need a courtesy a&&roval in
Congress# In Meico, &olicy ma%ers and industry e&erts understand that the election "hich too% &lace last year in the U#S# is
&artially res&onsi4le for the delayG ho"ever, they are ho&ing for a s&eedy resolution and are said to 4e gro"ing im&atient# Duncan
!ood, "ho is an energy reform advisor to the Meican government and director of the Meico Institute summed u& the issue 4y
saying the finali@ation of the deal 2"ill 4e seen as a very &ositive ste& for"ard and "ill encourage
the &rocess of energy reform in Meico# Any further delay is ris"y # %t will send exactly t$e
wrong message# *hose &eo&le "ho are o&&osed to o&ening the sector in Meico "ould 4e a4le to loo% at this and to say,
Nsee, the United States all they "ant is access to our oil O it>s not a4out "hat>s good for Meico#> 5
Pinsert im&act from Meican relations fileQ
)ac aff solves
T*A is critical to increased relations, t$e Mexican economy, and stability
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Senator )ichard F# Bugar, )an%ing Mem4er of the Senate Coreign )elations Committee, re=uested senior &rofessional staff
mem4ers to revie" o&&ortunities for enhanced U#S#?Meico engagement on oil and gas issues including
the U#S#?Meico *rans4oundary Agreement, "hich re=uires Congressional action to ta%e effect# As
&art of that revie", mem4ers of Senator BugarIs staff traveled to Meico City in <cto4er 7D'7 to meet "ith then President?elect
Enri=ue Pena NietoIs transition team and leaders from the Meican Congress, PEMEL, the Meican energy regulator Comision
Nacional de $idrocar4uros, U#S# industry, academic s&ecialists, and U#S# officials at Em4assy Meico City#S'S *his re&ort contains
their &u4lic findings and recommendations# Congressional attention to the Meican energy situation is
critical for understanding 4ilateral issues 4et"een our countries and for consideration of U#S#
energy security# *he United States has a &rofound interest in economic prosperity and &olitical
sta4ility in Meico, and energy is foundational to 4oth interests# <il is vital for the Meican
federal 4udget , under"riting 4oth social &rograms and la" and order , and the oil industry is an
im&ortant as&ect of 4roader economic activity# Sta4ility and gro"th, or lac% thereof, in MeicoIs oil and gas sector
can directly im&act issues of 4ilateral concern#
n$ances overall cooperation
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*he *;A further contains re=uirements of data sharing and notification of li%ely reserves
4et"een the United States and Meico, o&ening the o&&ortunity for increased government?to?
government colla4oration on strategic energy &olicy choices# Meico and the United States are
relatively less advanced in effective communication and lin%ages of our energy systems than "e are
in less &olitically?controversial economic areas# %mproved ties can im&rove understanding
and galvani@e coo&eration in often unexpected ways# In the immediate term, closer oil sector
communication "ill 4e 4eneficial in case of accidents in the Fulf of Meico or in case of significant
disru&tions to glo4al oil su&&lies #
T-A implementation solves Mexican relations
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Cinally, &assage of the *;A "ould 4oost U#S#?Meico relations on energy issues, "hich have
traditionally lagged# Meican officials roundly e&ressed su&&ort for the *;A and e&ectation for
U#S# ratification in conversation "ith the authors# *he &olitical im&act of not a&&roving and im&lementing the *;A
"ould set 4ac% U#S#?Meican relations on energy s&ecifically and more 4roadly # Each of our countries has hot
4utton domestic &olitical issues that ta%e courage for &olitical leaders to address# In Meico, oil is one such issue, and mem4ers of
4oth the PAN and P)I &ut their &olitical "eight 4ehind ratification in Meico# *he U#S# not fulfilling its side of the
agreement "ould, therefore, 4e seen as a violation of trust and could erode confidence # In the etreme,
although unli%ely, if Meico &roceeds "ith domestic energy reforms, U#S# com&anies could 4e shut
out of certain o&&ortunities until the *;A is ratified# $o"ever, 4ilateral 4enefits of a&&roving the agreement do not re=uire
immediate &assageG U#S# commitment can 4e demonstrated 4y the <4ama administration formally su4mitting the *;A for
Congressional a&&roval and commencement of Congressional hearings#
T*A solves relations
Martin and Wood 13 O *Director of the Energy Program at the Institute of the Americas at
the University of California, San DiegoG **Director of the Meico Institute at the !oodro"
!ilson International Center for Scholars, &rofessor for '( years in Meico and &reviously "as
director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de
M,ico -I*AM9 in Meico City -.eremy M# and Duncan, 2U#S# ShoUld Act 3Uic%ly on
trAnS4oUndAry hydrocAr4on Agreement !ith meico,5 !orld Politics )evie", May 1, 7D'1,
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Cirst, a&&roval of the deal in the U#S# "ould 4e an im&ortant sign of 4ilateral concord, &articularly
at the outset of a ne" administration in Meico and a second term for <4ama# *his is im&ortant, as it
underscores the t"o nations> increasing a4ility to "or% together and conclude com&licated
agreementsEand coo&erationEon 4inational issues unrelated to immigration or crime and drugs#
)ac terrorism add#on
Mexican relations solves drug cartel expansion
Roseman 1) O )esearch Associate at the Council on $emis&heric Affairs -Ethan,
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htt&600"""#coha#org0enhanced?reci&rocity?for?the?u?s?meico?relationshi&0900;"ang
*he economy in the U nited States is currently in turmoil, as evident 4y the 2fiscal cliff5 negotiations that may result
in an overall ta adAustment# As such, a stronger 4i?lateral trade relationshi& "ith Meico might turn out to 4e
a vital factor in the restoration of the U#S# economy in the months to come# President <4ama>s
relentless efforts to find a solution to the deficit &ro4lem may 4e more &roductively directed
to"ards a colla4orative relationshi& "ith ne"ly elected Meican President, Enri=ue PeMa Nieto# *his revived
North American relationshi& 4et"een the t"o leaders, tied together 4y increasing cross?4order trade, has the &otential to
mutually stimulate 4oth the United States and Meican economies# $o"ever, as the Meican
economy continues to rise, it is li%ely that &o"erful Meican drug cartels, along "ith &er&etuated violence and
corru&t &u4lic officials associated "ith these criminal organi@ations, could "itness a concurrent e&ansion as "ell# <n
Decem4er 7, Enri=ue PeMa Nieto assumed office as the President of Meico and 4egan the tedious &rocess of
reesta4lishing Meico as a country of economic distinction and glo4al im&ortance, rather than
continue to 4ear its current stigma as a narco?state that has seen nearly RD,DDD drug related
deaths since 7DDR#P'Q In an attem&t to redirect international focus a"ay from the 4loodshed, President PeMa Nieto has 4een
sho"casing the 4righter side of Meico "hile on a recent !hite $ouse visit in "hich President <4ama &raised him for his
2am4itious reform agenda5# Domestically, PeMa Nieto has 4een &romoting this o"n '1?&oint &lan that em&hasi@es his
&arty>s focus on o&timistic economic gro"th in Meico>s future, rather than one in the hands of
corru&t agencies and drug cartels# PeMa Nieto>s o&timism a4out his country>s future is a &roduct of increased trade and
the volume of industrial e&orts to Meico>s northern friend and ally# In 7D'', "ith nearly HD &ercent of all Meican goods 4eing
e&orted to the United States, Meico 4ecame the second largest oil su&&lier to the North American su&er&o"er# Numerous factors
contri4ute to this relationshi&, s&ecifically6 a 7,DDD?mile 4order that facilitates ' million daily travelers, an internationally
recogni@ed free trade agreement -NAC*A9, numerous 4i?national organi@ations and agreements, u&"ards of 'H,DDD U#S# invested
com&anies "ith over V'J/ 4illion USD invested in Meico and an overall average e=ual to V'#7/ 4illion USD in reci&rocal trade &er
day#P7Q As Meico e&eriences increases in international investment, there "ill 4e an increasing &arallel in levels of Meico>s
relia4ility# *he rise of 4i?lateral cor&orations forces an increasingly clear de&enda4ility that is needed in Meico in order to maintain
the millions of USD invested through these com&anies# A continued rise in the Meican?American commercial
relationshi& is one of the defining factors that "ill 4e necessary to contri4ute to the &roAected
mutual economic &rogress of 4oth countries# Although the current trade relationshi& 4et"een the United
States and Meico is un&aralleled, the drug?induced side south of the 4order al"ays seems to overshado" such
a ra&&ort# Since 7DDR, Meico has e&erienced u&"ards of RD,DDD deaths, including at least 1,DDD &olice officers and soldiers
"ho confiscated over ''J tons of cocaine, '',DDD tons of mariAuana, (/ tons of metham&hetamines and close to 'DD,DDD large and
small?scale firearms# Fiven the structured control of 8D &ercent of the cocaine that enters the United States and an
estimated annual income of 'H to 18 4illion USD, it is the Meican drug cartels that truly govern these &olitical units and
furthermore, utili@e etortion, corru&tion and etreme violence in order to 4ring a4out current hostile stereoty&es
that the rest of the "orld associates "ith Meico#P1Q
T$e impact is WM. terrorism on t$e &(
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MIAMI E *here is real danger that Islamic etremist grou&s such as al?3aida and $e@4ollah could
form alliances "ith "ealthy and &o"erful Batin American drug lords to launch ne" terrorist
attac%s, U#S# officials said !ednesday# Etremist grou& o&eratives have already 4een identified in several Batin
American countries, mostly involved in fundraising and finding logistical su&&ort# ;ut Charles Allen, chief of
intelligence analysis at the $omeland Security De&artment, said they could use "ell?esta4lished smuggling routes and drug
&rofits to 4ring &eo&le or even "ea&ons of mass destruction to the U#S# W*he &resence of these &eo&le in
the region leaves o&en the &ossi4ility that they "ill attem&t to attac% the United States,W said Allen, a
veteran CIA analyst# W*he threats in this hemis&here are real# !e cannot ignore them#W Added U#S# Drug Enforcement
Administration o&erations chief Michael ;raun6 WIt is not in our interest to let that &ot&ourri of scum to come together#W
/uclear terrorism results in extinction
Ayson 12 -)o4ert, Professor of Strategic Studies and Director of the Centre for Strategic
Studies O Xictoria University of !ellington, 2After a *errorist Nuclear Attac%6 Envisaging
Catalytic Effects5, Studies in Conflict and *errorism, 11-(9, .uly, Informa!orld9
!ashington>s early res&onse to a terrorist nuclear attac% on its o"n soil might also raise the
&ossi4ility of an un"anted -and nuclear aided9 confrontation "ith )ussia and0or China# Cor
eam&le, in the noise and confusion during the immediate aftermath of the terrorist nuclear
attac%, the U#S# &resident might 4e e&ected to &lace the country>s armed forces, including its
nuclear arsenal, on a higher stage of alert# In such a tense environment, "hen careful &lanning
runs u& against the friction of reality, it is Aust &ossi4le that Mosco" and0or China might
mista%enly read this as a sign of U#S# intentions to use force -and &ossi4ly nuclear force9 against
them# In that situation, the tem&tations to &reem&t such actions might gro", although it must
4e admitted that any &reem&tion "ould &ro4a4ly still meet "ith a devastating res&onse# As &art
of its initial res&onse to the act of nuclear terrorism -as discussed earlier9 !ashington might
decide to order a significant conventional -or nuclear9 retaliatory or disarming attac% against the
leadershi& of the terrorist grou& and0or states seen to su&&ort that grou&# De&ending on the identity and es&ecially the location of
these targets, )ussia and0or China might inter&ret such action as 4eing far too close for their comfort, and &otentially as an
infringement on their s&heres of influence and even on their sovereignty# <ne far?fetched 4ut &erha&s not im&ossi4le scenario might
stem from a Audgment in !ashington that some of the main aiders and a4etters of the terrorist action resided some"here such as
Chechnya, &erha&s in connection "ith "hat Allison claims is the 2Chechen insurgents> Y long?standing interest in all things
nuclear#5J7 American &ressure on that &art of the "orld "ould almost certainly raise alarms in Mosco" that might re=uire a degree
of advanced consultation from !ashington that the latter found itself una4le or un"illing to &rovide#
0il .ependence
1ac oil dependence
(tatus !uo Mexican imports are declining due to lac" of capital investment and
cooperation 3 t$e result is increased dependence on t$e middle east
4ugar 1) -)ichard Bugar, yeah the congressmen, -good luc% "0&olitics9 A MIN<)I*: S*ACC )EP<)* P)EPA)ED C<) *$E
USE <C *$E C<MMI**EE <N C<)EIFN )EBA*I<NS UNI*ED S*A*ES SENA*E <ne $undred *"elfth Congress Second Session
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*)ANS;<UNDA): AF)EEMEN* Decem4er 7', 7D'7 O;)!9
I directed Senate Coreign )elations Committee Senior Staff Mem4ers Neil ;ro"n and Carl Meacham to assess o&&ortunities for
enhancing the U#S#?Meico oil and natural gas relationshi&# Meico is a relia4le trading &artner# :et it continues
to struggle to maintain and increase its domestic oil &roduction# Calling =uantities of Meican
heavy oil availa4le for U#S# Fulf Coast refineries have actually $elped lead to increases in Middle
astern imports to t$e &'(' even as our total im&orts have fallen# Congress needs to understand the
o4stacles??and o&&ortunities??ahead in MeicoIs oil &roduction# Put 4luntly, "e %no" that "e can rely on Meico as a
trading &artner, 4ut "e do not %no" the =uantity or the =uality of oil to e&ect it to 4e a4le to e&ort in the years ahead# Fiven
domestic &olitical sensitivities a4out oil "ithin Meico, t$e bilateral relations$ip on t$is topic $as
struggled' :et, t$e newly elected 5resident of Mexico $as signaled a desire to wor"
toget$er on energy issues, and the largest o&&osition &olitical &arty Aoins in that call# I urge my colleagues, and the
<4ama administration, to sei@e todayIs o&&ortunity# My staff identified s&ecific areas in shale gas, safety enhancement,
trans&arency, and security that re&resent near?term o&&ortunities for 4ilateral gain# I strongly encourage the <4ama
administration to send the U#S#?Meico *rans4oundary Agreement, signed in Ce4ruary of this year, to
Congress and urge my colleagues to &ass the agreement# *he *rans4oundary Agreement is good for energy
security, good for the environment, good for U#S# commercial interests, and, most critically, can o&en the door to 4ilateral
engagement on shared energy interests# *his re&ort &rovides useful insight on the need and &ros&ects for domestic oil sector reforms
in Meico and im&ortant recommendations for the U#S# government to ta%e in order to strengthen U#S#?Meico energy coo&eration# I
ho&e that you find this re&ort 4y Mr# ;ro"n and Mr# Meacham hel&ful and loo% for"ard to "or%ing "ith you on these issues#
Sincerely,
0nly ratifying T*A solves t$at
-oman, 13 oil and natural gas e&ert -Karen ;oman, J0770'1, 2;ill See%s to Allo" Drilling
Near US Meico Maritime ;order5, htt&600"""#rig@one#com0ne"s0article#as&U
aTidZ'7/8/D900EM
;ill See%s to Allo" Drilling Near US Meico Maritime ;order A legislative hearing "ill ta%e &lace *hursday in !ashington D#C# as
la"ma%ers consider a 4ill that "ould lift the current moratorium on drilling along the U#S#?Meico maritime 4order in the Fulf of
Meico# $#)# 'R'1, the <uter Continental Shelf *rans4oundary $ydrocar4on Agreement Authori@ation Act, "ould amend
the <uter Continental Shelf Bands Act and im&lement the terms of the U#S#?Meico *rans4oundary $ydrocar4on
)eservoirs Agreement# *hat agreement, signed in Ce4ruary 7D'7 4y then Secretary of State $illary Clinton and MeicoIs Minister of
Coreign Affairs Patricia Es&inosa Castellano at the F?7D Summit in Bos Ca4os, Meico, "ould govern develo&ment of shared oil and
natural gas resources in the U#S# Fulf 4et"een the United States and Meico maritime 4order# *he agreement lifts the current
moratorium on e&loration and &roduction along the !estern Fa& section of the 4oundary,
o&ening u& '#/ million acres in the Fulf &reviously off limits due to 4order issues, and &rovides a
frame"or% for the safe management of oil and gas resources in the 4oundary area# Beaseholders on the U#S# side of
the 4oundary and Petroleos Meicanos "ould 4e a4le to e&lore and e&loit a trans4oundary reservoir as a unit as leaseholders are
&ermitted to do on the U#S# side of the 4oundary# *he agreement also "ould allo" a means of resolving dis&utes and esta4lish a
system of Aoint ins&ections# W*his 4ill is another ste& to"ards em4racing an all of the a4ove a&&roach to
energy that safely develo&s our natural resources to hel& achieve North American energy
inde&endence,W said )e&# .eff Duncan -)?S#C#9, "ho co?authored the 4ill along "ith $ouse Natural )esources Committee
Chairman Doc $astings -)?!ash#9 and $ouse Coreign Affairs Su4committee on !estern $emis&here Chairman Matt Salmon -)?
Ari@#9, in a statement# W*his 4ill "ill hel& lo"er energy costs "hile creating American Ao4s 4y safely o&ening u& more areas in the
Fulf of Meico for e&loration and &roduction#W WA&&roval and im&lementation of this agreement is un=uestiona4ly in the national
interests of the U#S# as a ste& to"ards energy security and Ao4 creation in the United States, as "ell as much needed energy reform in
Meico, and !estern $emis&here energy inde&endence,W said Salmon in a statement# WWe can ac$ieve energy
independence and 4etter energy coo&eration "ith our neigh4or and t$is is an im&ortant ste&
in that direction#W MeicoIs Senate ratified the agreement in A&ril 7D'7# *he agreement "as negotiated &ursuant to the 7DDD
*reaty on the Continental Shelf, "hich called for the United States and Meico to esta4lish a mechanism that trans4oundary oil and
gas reserves "ould 4e shared e=uita4ly, according to a Decem4er 7D'7 re&ort &re&ared for the U#S# SenateIs Committee on Coreign
)elations# At the time, concern that com&anies "ould drain Meican reserves from the United States side of the 4order "as
re&ortedly a hot 4utton &olitical issue in Meico# *he United States &laced a moratorium on oil and gas e&loration on the U#S# side
of the maritime 4order u&on conclusion of the 7DDD *reaty# Cormer Sen# )ichard Bugar -)?Indiana9 last year urged the
<4ama administration to send the U#S# Meico *rans4oundary Agreement to Congress and for his colleagues
to &ass the agreement# Bugar, "ho re=uested senior staff mem4ers revie" o&&ortunities for enhanced
U#S#?Meico engagement on oil and gas issues including the trans4oundary agreement, said congressional attention to the Meican
energy situation is critical for understanding 4ilateral issues 4et"een our countries and for consideration of U#S# energy security#
WMeico is a relia4le su&&lier of oil to the United States,W said Bugar in a Decem4er 7D'7 re&ort# W*he =uestion for U#S# &olicyma%ers
is "hat volumes Meico "ill 4e a4le to e&ort in the future#W Meican &roduction has dro&&ed 4y over a =uarter
in the &ast decade, and the colla&se of Xene@uelan heavy oil &roduction and insufficient &i&eline
infrastructure to 4ring Canadian oil sands &roduction to Fulf Coast refineries means the United
States in effect has had to increase im&orts of Middle East crudes to ma%e u& for Meico &roduction
shortfalls, Bugar added#
(cenario one is (audi dependence
(audi Arabian instability is inevitable 3 but t$e &( gets drawn in if we6re
dependant on (audi 0il
7laser )211 -Professor of Political Science and International )elations Elliot School of International Affairs *he Feorge !ashington
University, 2 )eframing Energy Security6 $o" <il De&endence Influences U#S# National Security,5 August 7D'',
htt&600de&ts#"ashington#edu0&olsadvc0;log[7DBin%s0FlaserT?TEnergySecurity?AUFUS*?7D''#doc9
A cutoff of Saudi oil might &ose a sufficiently a large threat to the U#S# economy to "arrant U#S#
military intervention# Saudi oil accounts for more that '/[ of glo4al oil e&orts and a long?term cutoff of Saudi oil "ould im&ose large costs
on the U#S# economy# Even analysts "ho 4elieve that most su&&ly interru&tions can 4e a4sor4ed and offset 4y the international oil mar%et and
countries> strategic &etroleum reserves conclude that the loss of Saudi oil is the ece&tion#
'
Conse=uently, a cutoff of Saudi oilE"hether
resulting from a Saudi?im&osed em4argo, domestic u&heaval "ithin Saudi Ara4ia, or attac% 4y a regional adversaryEmight "arrant U#S#
military intervention# Saudi leaders a&&ear unli%ely to im&ose another em4argo 4ecause their country de&ends heavily on oil revenues and,
&ossi4ly more im&ortant, 4ecause the sta4ility of the Saudi regime de&ends on continuing to &rovide &ros&erity via the flo" of oil# *his reluctance is
reinforced 4y Saudi recognition that the em4argo it im&osed in '8(1 resulted in a variety of su4stantial costs#
7
*he more li%ely &aths for a cutoff of
Saudi oil involve internal conflict# *he &ossi4ilities include the violent overthro" of the Saudi regime 4y a radical grou& that decides to greatly reduce
the &roduction of Saudi oil and the destruction of the oil fields during a civil "ar or massive terrorist attac%# *he &ossi4ilities for
domestic u&heaval have roots in the "ea%nesses of the Saudi economy, divisions "ithin the
regime, =uestions a4out the regime>s legitimacy -"hich su&&ort o&&osition 4y radical Islamic factions9, and regional and
tri4al divides "ithin the %ingdom#
1
;efore the Ara4 S&ring, assessments of the sta4ility of the Saudi regime diverged
J
6 for eam&le,
one account concluded that (audi Arabia 8could e&lode into violent conflict at any time, destroying the oil
fields and much of the "orld>s economyG5 in contrast, another assessment concluded that although Saudi Ara4ia e&erienced un&recedented internal
violence from 7DD1 to 7DD(, this e&erience 2re&resents an ece&tion "hich confirms the rule of Saudi Ara4ia>s relative internal sta4ilityY*he Saudi
regime is currently more secure and less challenged from "ithin than it has 4een in a very long time#5
/

1
Gholz and Press, Protecting The Prize, pp. 481-483.
2
te!e ". #eti!, Crude Awakening: Global Oil Security and American Foreign Policy $%thaca& 'ornell
(ni!ersit) Press, 2**4+, chap. 8, and pp. 1,3-,- speci.icall) on a/di 0ra1ia2 his anal)sis relies partl) on
lo3 oil prices, so the constraints toda) are less se!ere2 and te!en 4. 5a!id, Catastrophic Consequences:
Civil ar and American !nterests $6alti7ore& The 8ohns 9op:ins (ni!ersit) Press, 2**8+, chp. 2.
3
5a!id, Catastrophic Consequences, chp. 2.
4
;or an o!er!ie3 o. internal and e<ternal threats #eti!, Crude Awakening, chap. T3o.
,
5a!id, Catastrophic Consequences, pp. 3*-312 Tho7as 9eggha77er, %sla7ist =iolence and 4egi7e
ta1ilit) in a/di 0ra1ia, !nternational A""airs, =ol. 84, >o. 4 $2**8+, pp. ?*1-?1,, at p. ?1,. @ther
relati!el) opti7istic assess7ents incl/ded 8. 4o1inson Aest, a/di 0ra1ia, %raB and the G/l., in
Calic:i and Gold3)n, #nergy and Security.
T$at fuels regional arms racing 3 specifically results in (audi proliferation
4uft )229 -Fal Buft, eecutive director of the Institute for the Analysis of Flo4al Security, 2De&endence on Middle East Energy and its Im&act
on Flo4al Security,5 Institute for the Analysis of Flo4al Security, most recent cited date O 7DD(,
htt&600"""#iags#org0luftTde&endenceTonTmiddleTeastTenergy#&df,9
Des&ite the high visi4ility of the Ara4?Israeli conflict, historically, "ars among Muslim countries in the Middle East have caused far 4igger losses in
terms of 4oth 4lood and treasure# Such conflicts have 4een a desta4ili@ing factor for the glo4al energy mar%et# ;oth the Iran?Ira= !ar and the '88D
Ira=i invasion of Ku"ait caused energy crises "hich "ere follo"ed 4y recessions# In such a com4usti4le environment
fee4le and insecure regimes flus$ wit$ petrodollars feel the need to arm themselves to the teeth,
fueling a regional arms race "hich only contributes to the general sense of insecurity' *his &ro4lem is
no" 4eing eacer4ated 4y the dee&ening rift 4et"een Sunnis and Shiites as it e&resses itself in Ira=# !hile
Sunnis constitute the lion share of the Muslim "orld as a "hole, in the Persian Fulf, Shiites com&rise a (D?&ercent maAority# *his means that the divide
4et"een Sunnis and Shiites "ill inesca&a4ly affect the oil mar%et# Increasing sectarian violence and ina4ility to reach an acce&ta4le "ealth sharing
com&romise is ta%ing a heavy toll on the Ira=i oil industry "ith &rofound im&lications for the glo4al oil mar%et# Cour years after the U#S#?led invasion,
Ira= has not 4een a4le to match its &re?"ar crude &roduction level of 7#/ million 4arrels &er day# Due to non?sto& sa4otage ta%ing &lace in the north,
Ira= "as 4arely a4le to &roduce 7#' million 4arrels &er day in 7DDR# Perha&s the 4iggest casualty of a s&illover of Muslim sectarianism
"ould 4e Saudi Ara4ia# *he eastern &rovince of Saudi Ara4ia is home to most of the Kingdom>s giant oil fields and e&ort terminals# It is
also the home of the 4itter Saudi Shiite minority# Shiites ma%e u& roughly '/ &ercent of Saudi Ara4ia>s &o&ulation of 7/ million# *hey are treated as
second?class citi@ens and they har4or strong antagonism against the Kingdom>s !ahha4i esta4lishment "hich considers them heretics# Should an
Iranian ins&ired Shiite revolt 4rea% out, the damage to the Saudi oil industry and the "orld economy at large could 4e incalcula4le#
(audi proliferation collapses t$e &'(' (ecurity &mbrella in t$e middle east and
allows for terrorist groups to obtain nuclear weapons
Mc.owell 3, Bt, US navy, Novem4er 7DD1 -Steven ,2Is Saudi Ara4ia a Nuclear *hreatU5 Naval Postgrad *hesis,
htt&600"""#ccc#n&s#navy#mil0research0theses0McDo"ellD1#&df?;)!9
*he security umbrella provided by t$e &'(' military $as enabled t$e & nited
( tates to maintain a level of influence wit$ (audi Arabia , "hich often eercises &redominant
influence on the glo4al su&&ly of oil# If the Saudis re&lace their CSS?7 missile system "ith a more
modern, nuclear missile system , the region could spiral into a new arms race at a time "hen
one of the region>s &rimary &roliferators PIra=Q has 4een su&&ressed# A new arms race could potentially
destabili:e t$e global supply of oil ;ust as t$e United States and the glo4al economy are
re4ounding from the attac%s of Se&tem4er '', 7DD'# *his U#S#?Saudi relationshi& "ould face tremendous strain if the Saudis
ac=uired a nuclear ca&a4ility# In the event of a cou&, (audi nuclear capability could potentially
fall into t$e $ands of a new and unstable leaders$ip # In the event of a failed Saudi state follo"ing
a 2cou& gone "rong,5 the effects "ould 4e even more catastro&hic for the United States and the Fulf region# *he &ur&orted
nuclear "ea&ons could also fall into t$e $ands of Al#<aeda members or other radical
fundamentalist grou&s, "hich could attem&t to hold the United States hostage, levy demands, and further ham&er
U#S# efforts in the "ar on terrorism#
/uclear terrorism causes extinction
(id#A$med = -Mohamed Sid?AhmedG former mem4er of the Political ;ureau of the Communist Party of Egy&t, leading
mem4er of the National Progressive Unionist Party, and leading Aournalist for Al?AhmarG Accessed .une 7/, 7D'7G
htt&600"ee%ly#ahram#org#eg07DDJ0(D/0o&/#htmG !ritten August 7R, 7DDJG 2Etinction\5?;)!9
*he advent of the nuclear age, "hich 4egan "hen America dro&&ed t"o atom 4om4s on $iroshima and Naga@a%i Aust
4efore the end of !orld !ar II, introduced an altogether ne" dimension to the arms race "orld"ide# In fact, it changed the
very notion of "arfare as the realisation set in that human%ind no" had the means to turn the &lanet into a
"asteland inca&a4le of sustaining life# Cor the first time in its long history, the human race "as at ris% of
etinction not through an act of nature 4ut 4y its o"n hand# At the same time, ho"ever, the emergence of a ne"
"orld order in the aftermath of the "ar served to &revent the ris% from materialising even as it lent im&etus to a deadly arms?
race of the summit of the glo4al community# *he &ost?"ar "orld had 4ecome shar&ly &olarised along ideological lines 4et"een a
ca&italist &ole led 4y the United States and a communist &ole led 4y the Soviet Union# As each sought to assert its su&remacy
over the other, the "orld "as held hostage 4y an arms race 4et"een t"o cam&s ca&a4le of eterminating the inha4itants of the
&lanet not once 4ut several times over# Although one of the t"o &oles develo&ed a greater over%ill ca&a4ility than the other, this
hardly mattered# After all, you can only die once# *hus des&ite this discre&ancy the t"o &oles enAoyed a %ind of &arity "hich
&revented the Cold !ar 4et"een them from hotting u& into an armed conflict# Mutual deterrence or, more &recisely, mutual
neutralisation, &roved to 4e the most effective "ay of &reventing the out4rea% of "hat "ould have 4een the third, and &ro4a4ly
final, "orld "ar# !ith the colla&se of the Soviet Union, the 4i&olar "orld order that had &revailed since the end of !orld !ar II
came to an end# America, "ith its military and economic &re?eminence over all other nations com4ined, "as no" the sole
remaining su&er&o"er, "ithout any constraints on its freedom of manouevre# *his created an im4alance in the "orld system
and tem&ted the US administration to &ursue its o"n agenda "ithout regard to considerations of international la", state
sovereignty or international &u4lic o&inion# *o give its eercise of 4rute force a sem4lance of legality, it came u& "ith its doctrine
of &re?em&tive "ars, li%e the one it launched against Ira=# It is 4ecoming increasingly clear that the onset of a uni&olar "orld
system has made the "orld more dangerous &lace, not the o&&osite# *he most critical moment "as the one "hen the Soviet
Union colla&sed and fragmented into a num4er of inde&endent re&u4lics# *he lac% of a central
authority in a vast nation "ith massive arsenals of nuclear and other "ea&ons of mass destruction
raised the nightmare &ros&ect of those "ea&ons falling into the hands of irres&onsi4le &arties "ho "ould
not hesitate to use them# Des&ite the acute contradiction on "hich it "as 4ased, the 4i&olar "orld order "as an
international system in "hich nations could 4e in a state of conflict 4ut "here they "ere also mem4ers
of the United Nations, related to each other via agreements, accords, treaties, etc## that is, through a
system of mutual o4ligations, "hich restricted, to one etent or another, their freedom of action# *he disa&&earance of
the Soviet Union left the field clear not only to the United States at the summit of the glo4al community 4ut to the forces of
international terrorism at its 4ase# *hese forces are "aging a "ar on the international system un4ound 4y any
constraints# It is a war waged by >irresponsible> groups w$o do not expose t$emselves to t$e
accountability of t$e world system, nor to transparency in any form # T$at is w$y
terrorism is so difficult to cast light on and can re&resent a greater danger t$an wars waged by regular
armies# During the Cold !ar, the over%ill ca&a4ilities develo&ed 4y the su&er&o"ers allo"ed them to use
deterrence as a device to &revent nuclear conflagrationG there "as a tacit agreement 4et"een them that "hile they
could, and did, engage in 4rin%manshi& 4y threatening to use their "ea&ons of mass destruction, they "ould desist from actually
doing so# In the a4sence of any %ind of &arity 4et"een the &rotagonists in today]s shado"y "ar on
terror, mutual deterrence $as been replaced by a &rocess of pre#emption that incites the
enemy to ta%e antici&atory measures# *he devastating attac% of '' Se&tem4er 7DD', "hich claimed nearly 1,DDD
victims, is a case in &oint# !hat &rovo%ed the attac%U !hy that &articular ty&e of antici&atory 4lo"U Is there an e&lanation for
the se=uence of events that 4egan "ith raids against t"o US em4assies in Africa, follo"ed 4y the attac% on an American
destroyer close to Aden and climaed "ith 80''U It "as a &ractice run for an even more devastating attac% involving nuclear
"ea&ons# ;ut if <sama ;in Baden "as in &ossession of nuclear "ea&ons at the time, "hy did he choose to go for an intricate &lan
entailing the hiAac%ing of four &assenger &lanes, tight synchronisation and s&lit?second timingU Surely triggering a nuclear
device "ould have 4een easier# Settling for the lo"?tech alternative of turning &lanes into missiles indicates that ;in Baden "as
not then in &ossession of nuclear "ea&ons# Actually, the idea of lin%ing terrorism to &rohi4ited "ea&ons of mass destruction
came from ;ush, not from the terrorists themselves, and "as aimed at esta4lishing some sort of lin% 4et"een Ira= and terrorism
to legitimise his "ar against Saddam $ussein# !e have reached a &oint in human history "here the
&henomenon of terrorism has to 4e com&letely u&rooted, not through &ersecution and o&&ression, 4ut 4y
removing the reasons that ma%e &articular sections of the "orld &o&ulation resort to terrorism# *his means that fundamental
changes must 4e 4rought to the "orld system itself# *he &henomenon of terrorism is even more dangerous than
is generally 4elieved# !e are in for sur&rises no less serious than 80'' and "ith far more devastating conse=uences# A
nuclear attac% 4y terrorists "ill 4e much more critical than $iroshima and Naga@a%i, even if ?? and this is
far from certain ?? the "ea&ons used are less harmful than those used then, .a&an, at the time, "ith no %no"ledge of nuclear
technology, had no choice 4ut to ca&itulate# *oday, the technology is a secret for no4ody# So far, ece&t for the t"o
4om4s dro&&ed on .a&an, nuclear "ea&ons have 4een used only to threaten# No" "e are at a stage "here they can 4e
detonated# *his com&letely changes the rules of the game# !e have reached a &oint "here antici&atory measures
can determine the course of events# Allegations of a terrorist connection can 4e used to Austify antici&atory measures,
including the invasion of a sovereign state li%e Ira=# As it turned out, these allegations, as "ell as the allegation that Saddam "as
har4ouring !MD, &roved to 4e unfounded# !hat "ould 4e the conse=uences of a nuclear attac% 4y terroristsU
Even if it fails, it "ould further eacer4ate the negative features of the ne" and frightening "orld in "hich "e are no" living#
Societies "ould close in on themselves, &olice measures "ould 4e ste&&ed u& at the e&ense of human rights, tensions
4et"een civilisations and religions would rise and ethnic conflicts would proliferate # It "ould
also speed up t$e arms race and develo& the a"areness that a different ty&e of "orld order is im&erative if
human%ind is to survive# ;ut the still more critical scenario is if the attac% succeeds# T$is could lead to a t$ird
world war, from w$ic$ no one will emerge victorious# Unli%e a conventional "ar "hich ends
"hen one side trium&hs over another, this "ar "ill 4e "ithout "inners and losers# !hen nuclear
&ollution infects the "hole &lanet, "e "ill all 4e losers#
T$eir turns will miss t$e boat # dependence on finite amounts of oil breeds conflict
3 increases t$e incentive to go to war w$ile s$ort#circuiting barriers to
conflict
7laser )211 -Professor of Political Science and International )elations Elliot School of International Affairs *he Feorge !ashington
University, 2 )eframing Energy Security6 $o" <il De&endence Influences U#S# National Security,5 August 7D'',
htt&600de&ts#"ashington#edu0&olsadvc0;log[7DBin%s0FlaserT?TEnergySecurity?AUFUS*?7D''#doc,9
<il de&endence could reduce a state>s security if its access to oil is vulnera4le to disru&tion and if oil is necessary for o&erating the state>s
military forces# Xulnera4le energy su&&lies can leave a state o&en to coercionErecogni@ing that it is more li%ely to
lose a "ar, the state has a "ea%er 4argaining &osition and is more li%ely to ma%e concessions#
R

Closely related, if "ar occurs the state is more li%ely to lose# Conflict that is influenced 4y this mechanism is not fundamentally
over the oilG
(
rather, "hen states already have incentives for conflict, the oil vulnera4ility influences their assessment of military ca&a4ilities and in turn
the &ath to "ar# )ecogni@ing this ty&e of danger during the Cold !ar, U#S# &lanning to &rotect its sea lanes of communication "ith the Persian Fulf "as
motivated &artly 4y the im&ortance of insuring the steady flo" of oil that "as necessary to ena4le the United States to fight a long "ar against the Soviet
Union in Euro&e# During the Second !orld !ar, .a&an>s vulnera4ility to a U#S# oil em4argo &layed an im&ortant role in destroying .a&an>s a4ility to
fight#
H
*his ty&e of threat to the U#S# military ca&a4ilities is not a serious danger today 4ecause the United States does not face a maAor &o"er ca&a4le of
severely interru&ting its access to %ey su&&lies of oil# In contrast, China does face this ty&e of danger 4ecause its oil im&orts are vulnera4le to disru&tion
4y the U#S# Navy# Protecting access to oil threatens other statesEan access?driven security dilemma *he vulnera4ility of a state>s access
to oil su&&lies could reduce its security via a second, more com&licated mechanismEif the state>s efforts to &rotect its access to oil
threaten another state>s security, then this reduced security could in turn reduce the state>s o"n security# *he danger "ould follo" standard
security?dilemma logic, 4ut "ith the defense of oil su&&ly lines re&lacing the standard focus on &rotection of territory# In the most etreme
case, a state could try to solve its im&ort vulnera4ility through territorial e&ansion# In less etreme cases,
the state could deal "ith its vulnera4ility 4y 4uilding u& military forces re=uired to &rotect its
access to oil, "hich has the unintended conse=uence of decreasing its adversary>s military ca&a4ility and signaling
that the state>s motives are malign, "hich decreases the adversary>s security, "hich leads the adversary to 4uild u&
its o"n military forces#
8
.ust as &rotecting a distant ally can re=uire a state to ado&t an offensive ca&a4ility, &rotecting access to oil can
re=uire offensive &o"er?&roAection ca&a4ilities# *hus, a state>s need to &rotect its access to oil could create a security dilemma that "ould not other"ise
eist# Conflict fueled 4y this security dilemma need not 4e over oil or access to oilG 4y damaging &olitical relations the security dilemma
could &revent the states from resolving &olitical dis&utes and avoiding the escalation of crises# $ere
again, the United States does not currently face this ty&e of dangerG this is largely 4ecause the military status =uo currently favors the United States,
"hich relieves it from having to ta%e &rovocative actions# In contrast, China>s efforts to &rotect its access to oil could 4e more &rovocative and generate
military com&etition "ith the United States# <il ma%es territory increasingly valua4le In this ty&e of case, a state &laces greater value
on o"ning territory 4ecause the territory contains energy resources that are increasingly valua4le# *he
greater value of territory can increase com&etition 4et"een states, 4ecause the 4enefits of success gro"
relative to the costs of com&etition, for eam&le, the costs of arming# Cor similar reasons, the greater value of territory increases the
&ro4a4ility that crises over territory "ill lead to "ar instead of negotiated com&romises, as states are more "illing to run the ris%s
of fighting#
'D
*his ty&e of conflict is the classic resource "ar, "hich is the &ath 4y "hich oil is most commonly envisioned leading to conflict#
''
!e can
also hy&othesi@e that the &ro4a4ility of conflict is greater "hen territorial 4oundaries are contested and the &olitical status =uo is am4iguous# ;ecause
the norm of state sovereignty is no" "idely held, states are less li%ely to launch e&ansionist "ars to ta%e other states> territory# $o"ever, "hen
4oundaries are not settled, states are more li%ely to com&ete to ac=uire territory they value and "ill com&ete harder "hen they value it more#
'7
In
addition, unsettled 4oundaries increase the &ossi4ilities for 4oundedly rational 4argaining failures that could lead to "ar# *here are t"o 4asic &aths via
"hich a state could 4ecome involved in this ty&e of oil conflict# *he more o4vious is for the state to 4e a claimant in the dis&ute and 4ecome directly
involved in a territorial conflict# *he second is li%ely more im&ortant for the United StatesEan alliance commitment could dra" the state into a
resource conflict that initially 4egan 4et"een its ally and another state#
'1
*he state "ould not have energy interests of its o"n at sta%e, 4ut intervenes to
&rotect its ally# Along this &ath, energy &lays an im&ortant 4ut less direct role in damaging the state>s security, 4ecause although energy interests fuel
the initial conflict, they do not motivate the state>s intervention#
'J
A later section e&lores the &ossi4ility of conflict 4et"een China and .a&an in the East
China Sea, "ith the United States dra"n in to &rotect .a&an and conse=uently involved in a "ar "ith China# !hen a state>s economy
-
;or a ./ll anal)sis o. the 3hen and ho3 oil dependence lea!es states !/lnera1le to coercion, see
4ose7ar) 0. Celanic, 6lac: Gold and 6lac:7ail& The Politics o. %nternational @il 'oercion $Ph5
dissertation, (ni!ersit) o. 'hicago, 2*11+.
?
;or i7portant e<ceptions, see Celanic, 6lac: Gold and 6lac:7ail.
8
8ero7e 6. 'ohen, $apan%s #conomy in ar and &econstruction $Dinneapolis& (ni!ersit) o. Dinnesota,
1E4E+.
E
@n the sec/rit) dile77a see 4o1ert 8er!is, 'ooperation (nder the ec/rit) 5ile77a, orld Politics,
=ol. 3*, >o. 2 $8an/ar) 1E?8+, pp. 1-?-2142 and 'harles F. Glaser, The ec/rit) 5ile77a 4e!isited,
orld Politics, =ol. ,*, >o. 1 $@cto1er 1EE?+, pp. 1?1-2*1.
1*
%n ter7s o. 1argaining theor), see 4o1ert Po3ell, 'argaining in the Shadow o" Power $Princeton&
Princeton (ni!ersit) Press, 1EEE+, 'hp. 3.
11
;or a generall) s:eptical anal)sis o. the standard reso/rce 3ar arg/7ents see 5a!id G. =ictor, Ahat
4eso/rce Aars, (he )ational !nterest $>o!e71erG5ece71er 2**?+.
12
;or related points, see ha..er, #nergy Politics, pp. -?-?*, 3ho identi.ies additional e<a7ples that % do
not address, incl/ding the pratl) %slands in the o/th 'hina ea and the 0rctic 'ircle.
de&ends heavily on oil, severe su&&ly disru&tions might do sufficiently large economic damage
that the state "ould use military force to &rotect its &ros&erity# A state this suffers this vulnera4ility ris%s not
only suffering the damage that could 4e inflicted 4y a su&&ly disru&tion, "hich might 4e the 4y?&roduct of unrelated domestic or international events,
4ut also ris%s 4eing coerced 4y an adversary# Conse=uently, states "ill "ant to 4e confident that their a4ility to im&ort oil "ill 4e
uninterru&ted and "ill &ursue &olicies to ensure secure access#
%nvestment solves long term oil dependence 3 Mexico is sitting on a goldmine it is
;ust a matter of investment and exploration
Myers et' Al 1) -!illiam C# Danvers, Staff Director Kenneth A# Myers, .r#, Staff Director U#S#
F<XE)NMEN* P)IN*INF <CCICE ((?/R( !AS$INF*<N 6 7D'7 A MIN<)I*: S*ACC
)EP<)* P)EPA)ED C<) *$E USE <C *$E C<MMI**EE <N C<)EIFN )EBA*I<NS
UNI*ED S*A*ES SENA*E O;)!9
Nonetheless, t$e &nited (tates $as direct interests in t$e future of oil and natural gas in
Mexico# Most im&ortant among U#S# interests is enhancing the &ros&erity of the Meican &eo&le# !ith strong cultural ties and a
shared 4order, the U#S# 4enefits "hen Meico gro"s# Petroleos Meicanos -5M?@ $as successfully staved off
years of decreasing oil production and discovered deep water resources, but it $as
not been able to meaningfully increase production 4eyond its @one of comfort in shallo" "ater#
!ithout reform, MeicoIs oil resources "ill not 4e develo&ed in a "ay that translates into a higher =uality of
life for Meicans# Meico is a relia4le su&&lier of oil to the United States# *he =uestion for U#S# &olicyma%ers is "hat volumes Meico
"ill 4e a4le to e&ort in the future# Meican &roduction dro&&ed 4y more than a =uarter in the last
decade, leaving U#S# refiners on the Fulf Coast geared for heavy oil having to loo% else"here#
Xene@uelan heavy oil &roduction has also colla&sed# Canadian heavy crude &roduction is increasing in the oil sands
region, 4ut &i&eline infrastructure is insufficient# *herefore, in effect, t$e &'(' $as $ad to increase
imports of Middle ast crudes in order to ma"e up for s$ortfalls in Mexico'
Understanding the li%ely traAectory of reform in Meico is necessary to a&&ro&riately &lan for future volumes and ty&es of crude oil
traded "ith the United States, "hich also "ill have 4roader im&lications for U#S# security and economic gro"th# Meican
energy reforms "ill determine to "hat etent Meico "ill 4e &art of future U#S#, and North American,
energy security# Progress, 4ut can it lastU A sna&shot of MeicoIs oil sector Meico has a long history of oil &roduction and has
&ros&ects for a 4right future as an oil &o"er, 4ut such an outcome is not guaranteed# Meico sits ato& significant
amounts of oil estimated at 'D#J 4illion 4arrels of &roven reserves, 4ut t$at number could
more t$an double "hen unconventional and dee& offshore reserves are fully &roven # *he large
unconventional Chiconto&ec area alone is estimated to hold u& to '(#( 4illion 4arrels# *urning MeicoIs oil resources into &ros&erity
for the Meican &eo&le is a tremendous challenge for PEMEL, its 'DD[ state?o"ned national oil com&any esta4lished in '81H after
international oil com&anies "ere e&elled#S1S Meican oil &roduction relies &rimarily on a fe" maAor fields, the largest of "hich
-Cantarell9 is in stee& decline# <il &roduction in Meico &ea%ed in 7DD1 at a4out 1#J million 4arrels &er day -m4d9, falling to 7#R
m4d in 7D'D# *hat &reci&itous fall is due &rimarily to the estimated (/[ decline in &roduction from the massive Cantarell field from
its &ea%# In recent years, CantarellIs decline has 4een com&ensated for 4y the Ku?Maloo4?^aa& -KM^9 fieldsG ho"ever, many
analysts dou4t the longevity of current &roduction in those fields# Barge increases in direct and
third?&arty investment in recent years has ena4led PEMEL to halt net decreases in &roduction, at least
tem&orarily# Im&ortantly, PEMEL also no" re&orts achieving a 'DD[ re&lacement rate for reserves, im&roving &ros&ects for
continued &roduction# Increased investment also has led to discoveries of large ne" dee& "ater resources at *rion, Su&remos, and
Maimino, achievements of "hich PEMEL officials are Austifia4ly &roud# Several interlocutors credited energy reforms &assed in
7DDH for ena4ling those finds 4y giving PEMEL more flei4ility to &artner "ith international com&anies on a service contract 4asis,
4uilding on the shift to reliance on contracting services to ena4le investments stretching from the late '88Ds# PEMEL leaders &lan to
raise &roduction to 7#( m4d in 7D'1 and 1 m4d 4y 7D'(, re=uiring u& to V1H 4illion annually in investment# Near term gro"th is
e&ected to come &rimarily from Chiconto&ec, a highly com&le unconventional onshore &roAect that is su4Aect of great ho&e and
scorn# Des&ite years of develo&ment and re&ortedly V/ 4illion in investment, the &roAect is "ell 4ehind e&ectations and currently
only (D,DDD 4arrels &er day are &roduced, "hich &uts claims of near?term gro"th in serious dou4t# <ver the longer?term
PEMEL has set a goal to increase &roduction to 1#1 m4d 4y 7D7J# Achieving that goal "ill
re=uire significantly more ne" &roduction than the difference 4et"een the 1#1 m4d goal and
13
till another path is .or a state to inter!ene in an energ)-dri!en con.lict to protect its access to oil2 this is
an e<a7ple o. ho3 !ario/s 7echanis7s co/ld o!erlap 3ith each other.
14
This can 1e /nderstood as a .or7 o. alliance entrap7ent2 see Glenn 9. n)der, The ec/rit) 5ile77a
in 0lliance Politics, orld Politics, =ol. 3-, >o. 4 $8/l) 1E84+, pp. 4-1-4E,.
todayIs 7#R m4d given e&ected large declines in KM^' ,ield decline emp$asi:es t$e urgent need
for Mexico to $ave several new pro;ects in t$e pipeline in order to maintain and
boost production' S%e&ticism of PEMELIs a4ility to com&ensate for declining fields has led to some dire forecasts# *he
U#S# Energy Information Administration has estimated that Meico "ill 4e a net im&orter of oil 4y 7D7D,SJS thus also raising
concerns a4out im&acts on its 4alance of trade# !hile not investigated on this StaffDel, that situation highlights the need for more
attention to demand management &olicies and continued reform of fuel su4sidies#S/S Mexico needs a diverse
portfolio of future oil pro;ects "ith staggered ca&acities over time# 5M? leaders $ave
identified suc$ a set of oil development pro;ects, including dee& offshore and the Chiconto&ec
unconventional area, each of "hich are com&le underta%ings "ith high &otential, forming a gro"th strategy to
com&lement conventional shallo" offshore &roAects and investment in enhanced recovery at &revious "ells# Some o4servers &oint
out that &rivati@ation of the sector "ould 4ring com&etition and &rivate investmentG ho"ever, that &ros&ect is so
remote as to 4e non?eistent and not under even s&eculative consideration# *herefore, t$e !uestion is w$at 5M?
can ac$ieve on its own or in partners$ip wit$ international companies' Most interlocutors
are s%e&tical of PEMEL having the ca&ital or e&ertise necessary to develo& dee& offshore fields, and, &ro4a4ly, the unconventional
reserves at Chiconto&ec# Analysts &oint out that PEMEL too% over '/ years and more than 7D "ells to discover the most recent dee&
"ater finds# Moreover, dee& "ater re=uires massive investments over many years, and even the "orldIs largest international oil
com&anies -I<Cs9 &artner "ith one another to generate ca&ital and s&read the ris% of such investments# PEMELIs ca&ital
limitations are further com&licated 4y the com&anyIs large de4t 4urden# <n the other side, &ro&onents of
PEMELIs a4ility argue that they have gained e&ertise and dramatically lessened the ris%s im&licit in develo&ment# PEMEL li%ely
could develo& a dee& offshore &roAect 4y 4uying technology and e&ertise through very generous service contracts "ith many of the
same com&anies "ith "hich the I<Cs contract# $o"ever, under current ca&ital and management constraints,SRS 5M?
alone is extremely unli"ely to $ave t$e resources necessary to underta"e multiple
massive deep offs$ore developments w$ile also investing in conventional oil
production' Moreover, "hile some technology can 4e &urchased through service contracts, &roAect management e&ertise to
run that ty&e of &roAect is not easily ac=uired# *herefore, the decision on "hether I<Cs should 4e granted access individually or in
&artnershi& "ith PEMEL to develo& oil in Meico de&ends on ho" much oil the Meican Fovernment "ants &roduced and over
"hat s&an of time# Interlocutors did not indicate that the e&ectations of either of the largest &olitical &arties or the Meican &u4lic
are conducive to the long time hori@ons it "ould ta%e for PEMEL under current conditions to fully develo& MeicoIs oil# Dealing "ith
this challenge is com&licated 4y the fact that PEMEL is as much a 4ureau of the government as it is a com&any# In defiance of
conventional 4usiness sense -of 4oth &rivate com&anies and state oil com&anies9, multi&le Ministries and a &olitically?a&&ointed
;oard of Directors ma%e %ey decisions, including deciding the amount and direction of investment in e&loration and develo&ment
of future &roduction# It is not clear that all 4oard mem4ers &ut the interests of the com&any, and hence future finances for the
Meican state, at the forefront of decision ma%ing# $aving &oliticians "ith multi&le constituencies -including the &etroleum "or%erIs
union and com&anies that thrive off the oil su&&ly chain9 and short?term &olitical considerations often ma%e
essential decisions is incom&ati4le "ith the long?term &lanning needed in the oil sector# $o"ever,
precisely because 5M? can 4e a useful tool for &olitical goals, achieving fundamental structural change is very
difficult# In sum, the authors agree that reform must $appen to sustain and robustly grow
Mexican oil production' *he sta%es of doing so are high for the Meican Fovernment# PEMEL directly
&rovides JD[ of government revenues, including significant resources transferred to the individual Meican states#
Decreased oil &roduction has, thus far, 4een offset 4y higher than average glo4al oil &rices, 4ut no
government budget s$ould rely so $eavily on volatile commodity mar"ets' !hile some
commentators have argued that the 4udgetary &ain of falling &roduction "ould 4e useful to "ean the 4udget from PEMEL, such a
&ros&ect could have "ide re&ercussions on all &rograms funded in the Meican 4udget, from &overty alleviation to the rule of la", let
alone 4roader economic gro"th# !hile oil &rovides vital government revenue, lac% of natural gas develo&ment
threatens to stunt Meican industry# It is re&orted that &arts of Meico could face natural gas shortages in the coming
year# Mean"hile, Meico sits on a sea of unconventional natural gas reserves# *he current natural gas situation??"hich several
interlocutors identified as a ]]crisisII??results from Meican natural gas 4eing &riced artificially lo" 4ecause it is lin%ed to the U#S#
&rice, "hich has fallen "ith the ra&id e&ansion of shale gas su&&lies# :et the im&act of U#S# su&&ly on Meican &rices eists des&ite
the limited &hysical integration of the t"o countriesI &hysical gas mar%ets# !hen com4ined "ith gas shortages in Meico, this
indicates the need 4oth for more &i&eline connections to the United States and for 4uilding out MeicoIs domestic gas infrastructure#
Doing so is made difficult, ho"ever, 4y confusion in the Meican mar%et "here the do"nstream natural gas sector has 4een
relatively li4erali@ed "hile the u&stream remains under the mono&oly control of PEMEL# *he lac% of an a&&ro&riate &rice signal
drives u& demand "hile, re&ortedly, causing PEMEL to ]]shutinII some conventional &roduction due to lac% of &rofita4ility# Several
interlocutors &ointed s&ecifically to the need for e&edited &i&eline construction to connect "ith *eas# 3uic% U#S# federal
and state actions to &ermit &i&elines could hel&fully reduce short?term su&&ly &ressures in
Meico and hel& o&en ne" mar%et o&&ortunities for U#S# gas# Bong?term economic gro"th in Meico,
ho"ever, is 4elieved to 4e 4etter served 4y develo&ment of its a4undant domestic resources# As an analyst said, ]]:ou cannot 4uild a
future in Meico 4ased on chea& gas im&orts from the U#S#II *he United States government estimates that
Meico has one of the largest shale gas reserves in the "orld at more than RHD trillion cu4ic feet
-tcf9 of technically recovera4le reserves, although Meico itself uses estimates as lo" as 'JD tcf#
Much of that shale gas is thought to 4e contained in an etension of the Eagle Cord formation that is already &roducing in *eas#
PEMEL re&ortedly has drilled Aust a handful of e&loratory "ells, and "ith &rices 4eing held do"n 4y the United States gas 4oom, it
has little economic incentive to invest heavily in shale in its o"n right, let alone the o&&ortunity cost of that ca&ital com&ared to
much more lucrative oil# A4sent natural gas &ricing reform, it is unli%ely that PEMEL "ill choose to invest heavily into shale gas#
A"areness of shale gas &otential is gro"ing in MeicoG at the time of the authorsI visit, for eam&le, the Meican government "as
hosting a meeting of shale gas e&erts# Many interlocutors "ere carefully "atching shale develo&ments in the United States 4oth in
terms of direct Ao4 creation and in "ider economic o&&ortunities for &o"er generation, chemicals, and manufacturing#
Develo&ment of shale could 4e &articularly hel&ful for economic gro"th in MeicoIs northern
4order region# *he authors found that develo&ing MeicoIs shale gas reserves, as "ith technologically
challenging ne" oil frontiers, "ill re=uire energy reform to galvani@e &rivate investment,
technology, and e&ertise# At the same time, an additional level of government ca&acity 4uilding "ill 4e useful to aid
official understanding in the geology, economics, and environmental &rotections necessary for shale &roduction# *he U#S# State
De&artmentIs Unconventional Fas *echnical Engagement Program is "ell &ositioned to ena4le access to needed information, if the
Meican Fovernment chooses to &artici&ate# Most interlocutors "ere o&timistic that gas reforms to allo" &rivate
investment "ould come to fruition 4ecause natural gas is generally regarded to 4e less &olitically
sensitive than oil# *he most common fear of such a reform e&ressed 4y interlocutors "as that if gas reform &assed se&arately
than oil reform, it could stunt momentum for the latter# Moreover, it is highly unli%ely that a successful natural
gas reform could 4e com&letely delin%ed from oil# ;ased on the U#S# e&erience, much of the &rofita4ility of shale
gas comes from associated high?value li=uids co?&roduced "ith the gas, so it seems unli%ely that significant &rivate ca&ital "ill flo"
if li=uids are not dealt "ith in reform#
)ac plan solves
T*A is "ey to relieving oil dependence
4ugar, 1) U#S# Senator -)ichard F# Bugar, '707'0'7, 2<IB, MELIC<, AND *$E
*)ANS;<UNDA): AF)EEMEN*5, htt&600"""#g&o#gov0fdsys0&%g0CP)*?
''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM
Dear Colleagues6 Energy security is a vital issue for U nited States foreign &olicy and economic gro"th#
Increases in U#S# domestic oil &roduction are hel&ing relieve our im&ort de&endence, yet our nation
"ill rely on oil im&orts for decades to come# Strengthening trade "ith relia4le, friendly neigh4ors Canada
and Meico "ould ma%e a valua4le contri4ution to our future# I directed Senate Coreign )elations Committee
Senior Staff Mem4ers Neil ;ro"n and Carl Meacham to assess o&&ortunities for enhancing the U#S#?Meico oil and natural gas
relationshi&# Meico is a relia4le trading &artner# :et it continues to struggle to maintain and increase
its domestic oil &roduction# Calling =uantities of Meican heavy oil availa4le for U#S# Fulf Coast
refineries have actually hel&ed lead to increases in Middle Eastern im&orts to the U#S# even as
our total im&orts have fallen#
)ac atA s$ale solves
.oesn6t solve
Mallet, 13 Partner in the Arra%is Frou&, a &rivate energy consulting firm, ;#Sc# in Chemical
Engineering from MI* and M;A from Stanford University -Xictor Mallet, /0'R0'1, 2Shale Fas _
Coreign <il6 $o" )ealistic Is US Energy Inde&endence5,
htt&600theenergycollective#com0victormallet077/R/'0shale?gas?foreign?oil?ho"?realistic?us?
energy?inde&endence?natural?gas900EM
Foing for"ard "e must 4e careful to avoid an a&&les?to?oranges com&arison# Most of the im&orted
hydrocar4ons are li=uid fuels and so "e must first see ho" far tight oil could go to"ards meeting
the ga&, and then evaluate ho" far shale gas can go to"ards covering the 4alance, &rimarily through gas?to?
li=uid conversion# Currently, tight oil from the ;a%%en and Eagle Cord Shale formation in North Da%ota dominate &roduction O
&roducing /J/,DDD 4arrels &er day -4&d9 in A&ril 7D'7, "ith national tight oil &roduction hitting (7D,DDD 4&d as at the end of 7D'7#
*his re&resents Aust over half the amount im&orted from a single im&orter such as Saudi Ara4ia, 4ut only H[ of total im&orts#
*here is an added layer of difficulty facing su4stitution# )efineries are highly s&eciali@ed to
o&timally &rocess a certain ty&e of oil de&ending on the =uantity of sulfur &resent -lo" sulfur crudes are %no"n as 2s"eet5 and high
sulfur crudes are 2sour59, and ho" 2heavy5 -highly viscous "ith a high s&ecific gravity9 or 2light5 -relatively lo"er viscosity and
s&ecific gravity9 the crude oil is# )efineries on the Eastern coast of the US are designed &rimarily for !est
African crudes that are light and s"eet "hereas Fulf of Meico refineries are tuned to &rocess heavy and sour Middle
Eastern, Meican and Xene@uelan crudes# It is "orth re&osting this great ma& from an article 4y ;rad Plumer of the !ashington
Post earlier this year# <il refineries in the USA Cig 16 !here US refineries get their oil -sourced from the !ashington Post, article 4y
;rad Plumer9 In fact, the advent of chea&er crude from *eas has revived numerous mori4und refineries such as Sunoco>s
Philadel&hia and Marcus $oo% refineries and ConocoPhili&s *rainer refinery in Dela"are -recently &urchased 4y Delta Airlines9#
;lue chi& &rivate e=uity firms are already &lacing 4ig 4ets on these, "ith *he Carlyle Frou& &urchasing a share in the Philadel&hia
refinery# Fiven the marginal additional tight oil from shale roc%, &rivate refineries in Ne" <rleans or
$ouston are unli%ely to re?tool their refineries at the cost of 4illions of dollars in order to acce&t s"eet,
light tight oil, "hen it is already finding a ready home in the Mid?Atlantic region# And so "hile some amount of im&ort dis&lacement
4y tight oil is occurring, it is at the e&ense of more friendly im&ort &artners such as Nigeria, Angola and Fhana# *he EIA e&ects
total US oil &roduction to &ea% at a4out '#J million 4&d from tight oil de&osits 4y 7D7D and that even into 7DJD there "ill 4e an
im&ort re=uirement of a4out 1([ of consumed li=uid fuel -see Cig J9# <il Im&orts vs Shale Fas Cig J6 EIA e&ectation of im&ort
consum&tion and domestic su&&ly ga& *he economics of converting gas to li=uid fuels -usually diesel9 also does
not &oint to massive re&lacement of im&orts# South African energy and chemicals giant Sasol has announced
tentative &lans for the first gas?to?li=uids &lant in the US? a V'J; facility to 4e 4uilt in Ba%e Charles, Bouisiana, that "ould &roduce
8R,DDD 4arrels a day# F*B &lants are of course only economical "hen there is a significant &rice differential 4et"een gas and diesel
-"ith the s"eet s&ot seemingly 4eing a difference of at least V''0MM;*U9 O and aided greatly "hen the gas does not have to 4e
&i&ed in and "ill 4e in &lentiful su&&ly for at least 7D years# Sasol has announced it "ill "ait till 7D'J to ma%e a final decision# Even
if the &roAect is green?lit, the additional fuel &roduced "ould re&resent Aust over '[ of &etroleum im&ort su4stitution# !ithout a
dou4t chea& shale gas &romises to usher in other maAor 4enefits O one "ould say a ne" era of American industrial &ro"ess# Already,
electricity &roduction 4y natural gas &lants almost matches that from coal O leading to an overall reduction in car4on dioide
emissions# In areas of Pennsylvania -under "hich "e find the Marcellus shale9 consumer electricity &rices have dro&&ed /D[#
$undreds of thousands of 2non?offshore?a4le5 Ao4s are 4eing created# *he Marcellus Shale Coalition, an industry grou& consisting of
1DD com&anies such as Chesa&ea%e Energy, Ca4ot <il _ Fas, Chevron and others &roudly &roclaim that the Marcellus shale industry
alone em&loys over 7JD,DDD "or%ers "ith an average annual salary of VR/,DDD &er year# Chea& natural gas is forming the 4asis for a
revived manufacturing industry, from fertili@er to &ro&ylene and ethylene -the "orld>s highest volume chemical, used to ma%e
everything from toys to clothes to car tires9, and even the steel industry is feeling the &ositive im&act# Serious environmental
concerns such as contamination of ground"ater a=uifers and induced seismic activity -mini earth=ua%es9 still need to 4e =uantified
and addressed -my colleague Frant McDermott has "ritten a4out some of this here9# Crac%ing is far from a &erfect techni=ue for
&rimary energy etraction, and documentaries such as .osh Co>s FasBand are immensely im&ortant in dra"ing &u4lic attention to
the &otential dangers and ma%ing sure there are ade=uate safety regulations to &revent "hat seems li%e an early "ild "est era of
shale gas drilling from destroying America>s "ater"ays# Shale gas and tight oil "ill not decou&le America from
the rest of the "orld# *he 4igger story is that "ith ne"found chea& shale gas America may finally have "hat it ta%es to chase
a"ay the looming ghosts of an ongoing domestic recession and the s&ecter of lost industrial dominance# *hat should 4e enough to
=uiet even the most adamant energy ha"%s#
nergy .iplomacy
1ac energy diplomacy
)etirement of Secretary Clinton has &ut an end to efforts at energy di&lomacy ? all current
&roAect are li& service
7eman 1) - Clinton6 IEnergy di&lomacyI central to US foreign &olicy ;y ;en Feman ? 'D0'H0'7 D86JR AM E*
htt&600thehill#com04logs0e7?"ire0e7?"ire07R7(7(?clinton?energy?central?&art?of?di&lomacy?foreign?&olicy`i@@7aAyDcRFA O;)!9
Secretary of State $illary Clinton "ill ma%e the case *hursday that 2energy di&lomacy5 is central to U#S# foreign
&olicy# *he !all Street .ournal got a loo% at the s&eech that Clinton "ill give *hursday afternoon at Feorgeto"n University#
2*oday, energy cuts across the entirety of U#S# foreign &olicy # It is a matter of national security
and glo4al sta4ility# It is at the heart of the glo4al economy # ItIs an issue of democracy and human rights,5
Clinton intends to say, the &a&er re&orted# 2 It has 4een a to& concern of mine as secretary # And it is
sure to 4e the same for the net secretary of State#5 Clinton is 2e&ected to stress the role that U#S# energy &roduction, cou&led "ith
U#S# di&lomatic efforts, has &layed in ratcheting u& sanctions on Iran,5 the .ournal re&orts# Clinton, "ho has said she "ill
not serve a second term even if President <4ama "ins, has 4oosted State>s focus on energy# Bast year State
launched its ;ureau of Energy )esources, aimed at hel&ing ensure 2ade=uate and afforda4le su&&lies,5 %ee&ing mar%ets sta4le,
aiding access to su&&lies in &oor countries and 4oosting trans&arency, among other goals# Clinton has 4een a vocal
su&&orter of controversial Securities and Echange Commission trans&arency rules that "ill force SEC?listed &etroleum
and mining com&anies to disclose their &ayments to foreign governments
*he &lan is %ey to e&anded energy di&lomacy O 4ilateral engagement s&ills over to 4roader
dialogue
7oldwyn 13 -David Fold"yn, President and Counder, Fold"yn Flo4al Strategies Energy <&&ortunities in Batin America and
the Cari44ean# *estimony 4y U#S# $ouse of )e&resentatives Documents O &u4lished6 7D'1 O a&ril ??
htt&600search#&ro=uest#com#&roy#li4#umich#edu0docvie"0'17R(18'JJ0'1C('RJ8H'A'7HE;EDC07UaccountidZ'JRR(?;)!9
<n Ce4ruary 7D, 7D'7, the U#S# and Meico signed a trans4oundary hydrocar4ons agreement that allo"s for
the Aoint the develo&ment of oil and gas reservoirs that cross the international maritime 4oundary 4et"een the t"o countries in the
Fulf of Meico# n1D If im&lemented, the agreement "ould end the current moratorium on e&loration and
&roduction in the 4order area# !hile the Meican Senate ratified the agreement on A&ril '7, 7D'7, the <4ama
Administration has not formally su4mitted the agreement to the U#S# Congress for &assage# *he
entry into force of this agreement "ould render significant 4enefits for 4oth the U#S# and Meico#1' It "ould
&rovide a means for Peme to colla4orate "ith &rivate com&anies in the Fulf of Meico 4order
area, "hich "ould give Peme a crucial o&&ortunity to gain e&ertise in dee&"ater activities that could 4e a&&lied to the firmIs
o&erations throughout Meico# *his "ould serve U#S# interests 4y 4oosting Meican &roduction and
reducing U#S# de&endence on im&orts from more &olitically trou4lesome regions, "hich have re&laced
lagging Meican e&orts in recent years#17 Conversely, U#S# reticence to im&lement the agreement may send the "rong signal to
Meico and dam&en enthusiasm for energy sector reform at a time "hen the stage may 4e set for historic change# Indeed,
com&etent im&lementation of the agreement could demonstrate to Meico that its interests can 4e &rotected in
Aoint &roduction regimes "ith U#S# com&anies and 4ring a4out an im&etus for 4roader Meican energy reforms# R#
)evive Energy Di&lomacy and Commercial Engagement Energy di&lomacy and commercial advocacy
should 4e vital com&onents of U#S# energy &olicy in the coming decades# *he glo4al energy system is &roAected to
remain de&endent u&on fossil fuels for the foreseea4le future, and as a result, having access to relia4le, afforda4le
sources of energy "ill remain im&ortant, as "ill the sta4ility of energy mar%ets# Energy di&lomacy should center on
ensuring that the U#S# has good "or%ing relationshi&s "ith the countries that &roduce and
consume energy # Successful energy diplomacy can serve a critical role in managing
tensions over energy develo&ment , trans&ortation, investment, and other issues# *he De&artment of
State has significantly increased its ca&a4ilities to conduct energy di&lomacy through the esta4lishment of the Energy and Natural
)esources ;ureau, led 4y Am4assador Carlos Pascual# Its &rograms should 4e ro4ustly funded# !e should also dee&en the
international energy di&lomacy ca&acity of the De&artment of Energy# *he De&artment of EnergyIs relationshi&s "ith civil servants
in ministries across the glo4e &rovide a 4ridge across changes in government here and there# *hey can tal% "hen the
&olitics of non?energy issues o4struct dialogue among the foreign ministries# It is easier to get Energy
Ministers together for regular meetings than Secretaries of State# *heir staff should 4e e&anded and serious &rogram 4udget
esta4lished to ma%e our coo&eration more than rhetorical# Cor true reform to 4e achieved, foreign ministers and
heads of government "ill have to 4e involved, as this "ill 4e the %ey to integrating energy security into
foreign &olicy# T$e t$ree countries t$at need robust attention at t$is time are Mexico,
-ra:il and Bene:uela# Meico is considering maAor reforms and "e have much "e can share at a technical level on gas
mar%ets, unconventional oil and gas technology, safe regulation of the dee&"ater, and energy efficiency# !e should create a =uiet
4ilateral mechanism for sharing this information "ith Meican ministries, its nascent regulator and
PEMEL# Changing glo4al mar%ets also im&act ;ra@il, and "e should ensure that the Strategic Energy Dialogue is
reactivated as soon as ne" officials are on 4oard at the De&artment of Energy# Xene@uela is tric%ier 4ecause it is in &olitical
transition and there is a great deal of rhetorical hostility# ;ut the US had a technical dialogue "ith Xene@uela that lasted over 1D
years# !e need to %no" the ne" officials at the Ministry and PdXSA and to share our vie" of mar%et realities, even if "e may not
agree on them# Sometime in 7D'1, after the Xene@uelan elections, this technical dialogue should 4e revived, &erha&s at the Assistant
Secretary, or De&uty Assistant Secretary level#
!e have t"o scenarios
Cirst is the Economy
S&ecifically hydrocar4on engagement acts as a Starting &oint for Energy di&lomacy O this is a
sta4ili@ing mechanism for transitioning energy 4ased economies 4ecause it acts as a 4ridge fuel
Ota%es out relations lin%s and solves commodity insta4ility "hich is %ey to 4roader economic
gro"th
*ormats 13 -!hy Flo4al Energy Di&lomacy Matters ;y )o4ert D# $ormats a *hursday, A&ril 7/, 7D'1 )o4ert D# $ormats
"as s"orn in as the U#S# Under Secretary of State on Se&tem4er 71, 7DD8# Mr# $ormats "as formerly vice chairman of Foldman
Sachs -International9# ;efore Aoining Foldman Sachs, he served as Assistant Secretary of State for Economic and ;usiness Affairs
from '8H' to '8H7, Am4assador and De&uty U#S# *rade )e&resentative from '8(8 to '8H', and Senior De&uty Assistant Secretary for
Economic and ;usiness Affairs at the De&artment of State from '8(( to '8(8# Mr# $ormats has 4een a visiting lecturer at Princeton
University and served on the ;oard of Xisitors at *ufts UniversityIs Cletcher School of Ba" and Di&lomacy and the DeanIs Council at
$arvardIs Kennedy School of Fovernment# $e is also a mem4er of the Council on Coreign )elations# O;)!9
AmericaIs gro"ing energy self?sufficiency raises a num4er of geo?&olitical and geo?economic
=uestions, says the State De&artmentIs )o4ert D# $ormats# *hese develo&ments &resent enormous
o&&ortunities not Aust for strengthening the U#S# economy and reducing U#S# financial outflo"s, 4ut also for ena4ling the
United States to &ursue ne" %inds of energy di&lomacy# *he "orldIs ne" energy geogra&hy and
increased American self?sufficiency should not 4e seen in the United StatesEor a4roadEas
foreshado"ing, or Austifying, an American &ull4ac% from the rest of the "orld# *he "orldIs ne" energy
geogra&hy and increased American self?sufficiency should not 4e seen in the United StatesEor a4roadEas foreshado"ing, or
Austifying, an American &ull4ac% from the rest of the "orld# Energy shortages, &rice volatility or disru&tions
any"here can threaten economic gro"th every"here # !e "ant to "or% "ith &artici&ants in this ne" geogra&hy
of energy E our traditional &artners &lus maAor emerging economies E to hel& vital goals# *he most
&rominent ones among them are to ensure sta4ility and trans&arency in energy mar%ets, the develo&ment
of alternative fuels , freedom of navigation and good environmental &ractices # *he United States has
seenEand "ill continue to seeEglo4al energy security, mar%et efficiency, sta4ility and coo&eration to 4e in our economic, foreign
&olicy and national security interests# ;ut the United States cannot successfully guarantee glo4al energy
security, efficiency and mar%et sta4ility on its o"n# *his is es&ecially true today, "ith so many ne" or ra&idly gro"ing &layers,
"ho account for ever?increasing amounts of the energy consum&tion and &roduction# <n the consum&tion side, the IEA re&orts that
nearly t "o?thirds of gro"th in glo4al energy demand over the net 7D years "ill come from
emerging economies in Asia# China, in &articular, is e&ected to use RH[ more energy than the United States 4y 7D1/#
Already, (/[ of oil flo"ing from the Persian Fulf goes to Asia# Increasingly, the Indo?Pacific Sea lanes "ill 4e the
channels for moving energy east# <ne gra&hic indication of this comes from &roAections that oil and gas shi&ments through
the Straits of Malacca "ill dou4le over the net t"o decades# As a result, many countries share an interest in %ee&ing
those lanes o&en and secureEand ensuring that dis&utes in the region are settled &eacefully and 4ased
on international la"# <n the &roduction side, technical advancements u&stream, ne" finds in &laces li%e *an@ania,
Mo@am4i=ue and the eastern Mediterranean, as "ell as the glo4ali@ation of natural gas mar%etsEdriven 4y the rise in BNF
tradeE"ill also alter su&&ly &atterns and the direction and volume of trade# MaAor changes in Euro&e in recent years have
demonstrated that a greater diversity of su&&ly choices, a "ider range of &i&eline and distri4ution systems, enhanced infrastructure,
&rice li4erali@ation as "ell as meaningful anti?mono&oly la"s and regulations have led to greater energy security and
more efficient mar%ets# As the U#S# ta%es advantage of o&&ortunities from the glo4al gas revolution, "e
cannot sto& strengthening environmental standards# *his has hel&ed these mar%ets overcome &ast rigidities, distortions and
&otential &olitical leverage# As Asian governments "eigh their o&tions, they find that their economies no" have
many com&etitive o&tions# *hese include &i&eline gas from Eurasia and BNF im&orts from Australia
and other &arts of Asia, 3atar and North America to fulfill their gro"ing demand for natural gas# <f course,
there is another layer of com&leity that must urgently 4e addressed E the interaction 4et"een energy and the environment# Flo4al
gro"th in energy demand in emerging economies has follo"ed the &ath set 4y the United States and other industriali@ed economies
in the course of their develo&ment# As countries develo&, they consume more energy# ;ut the &eriod of ra&id gro"th for most <ECD
countries came at a time "hen the environment "as for many an afterthought# *he "orld today no longer has that o&tion# *he
threats of catastro&hic climate change and &ermanent environmental degradation are real# Cor
many emerging countries, the environmental im&act is increasingly a&&arent "ithin their 4orders# Cho%ing &ollution
threatens the health of their citi@ensE&articularly childrenEand their &eo&lesI economic &roductivity as "ell
as the =uality of millions of lives# Fiven the 4road s"ee& of changes in the glo4al energy e=uation, it is clear
that "e need a ne" vision, a ne" &ath for"ard# I see four o&&ortunities# !hen it comes to natural gas mar%ets, "e all
EAsia es&eciallyEcan learn from the Euro&ean e&erience# *he first o&&ortunity is that all of our countries need to focus on
&roducing greater amounts of energy from rene"a4le sources, such as "ind, solar, geothermal
and hydro# !e also need to continue develo&ing nuclear &o"er, "hich offers a source of electricity free of C<7 emissions#
Accelerating the develo&ment and de&loyment of clean energy technologies "ill re=uire a rene"ed commitment to innovation#
Fovernments must, therefore, avoid mercantilist &olicies that hinder innovation# *hese detrimental &olicies include6
E Providing su4sidies to local &roducers, E Cavoring indigenous over foreign com&anies, E Corcing technology transfer as a
condition of mar%et access, E Distorting regulatory standards, as "ell as E Im&osing restrictive trade 4arriers# A ne" form of
mercantilism has emerged in the energy and environmental sectorsEoften referred to as Wgreen mercantilism#W !hile
attractive to some in the short?term, over the long?term, green mercantilism "ill discourage investments of time, money and talent
for the develo&ment of ne" technologies# *hese &olicies "ill reduce the &ace of innovation, "hich is critical to
revolutioni@e our energy sector and ena4le ne" technologies to 4e com&etitive, "ithout re=uiring su4sidies or
other forms of &rotection# *he ongoing natural gas revolution presents an intermediate or
bridge fuel opportunity' *he second o&&ortunity I see is that the ongoing natural gas revolution &resents an
intermediate or 4ridge fuel o&&ortunity# *he glo4al landsca&e has changed mar%edly 4ecause of ne" shale technologies, as "ell as
maAor conventional gas finds in Africa, the Mediterranean, Australia and other regions# *he United States has organi@ed
dialogues "ith a num4er of large emerging countries to discuss the develo&ment of their gas
resources # *he State De&artmentIs Unconventional Fas *echnical Engagement Program, in &articular, is hel&ing countries
develo& their gas resources safely and reasona4ly # <ur engagement "ith foreign governments
es&ecially features &rivate sector &artici&ation# Many of our com&anies have great e&erience in &roduction techni=ues that can 4e
de&loyed around the "orld# It is im&ortant to note that our engagement in this area involves our regulators, "ho can "or% "ith
foreign governments to &romote good environmental &ractices# )e&lacing other fuelsE&articularly coalE"ith natural gas
can 4enefit 4oth energy security and the environment# No"here is this truer than Asian countries, "here &o"er
sectors are ra&idly develo&ing# Natural gas, ho"ever, is not a &anacea# *he third o&&ortunity I see is that, as "e ta%e advantage of
dramatic ne" o&&ortunities stemming from the glo4al gas revolution, "e cannot lose momentum in &ursuing higher environmental
standards# *he State De&t#Is Unconventional Fas *echnical Engagement Program hel&s emerging mar%et countries "ith
develo&ment of gas resources# *his can 4e done "ith great effect# Cor instance, in the '8(Ds, the United States Congress &assed the
Clean Air Act# <"ing to this legislation, the United States enAoys some of the cleanest air in the "orld today# Some feared that that
the economy "ould 4e "ea%ened from clean air regulations# It "as not# National air =uality standards for the emission of sulfur
dioide and nitrous oides from &o"er &lants s&urred an industry of environmental control technology that created large num4ers
of Ao4s and &roduced over V1( 4illion in e&orts in 7D'D# *he fourth o&&ortunity I see is sim&ly to use energy more efficiently# *he
energy intensityE"hich is a measure of energy use &er dollar of FDPEof the U#S# economy is e&ected to decline 4y J7[ 4et"een
7D'D and 7D1/# Com&anies are striving for efficiency not sim&ly to advance good environmental &ractices, 4ut also 4ecause it is good
4usiness# ;eing more efficient ma%es them more com&etitive# Some governments, unfortunately, have gone do"n a &ath of
&roviding large fossil?fuel su4sidies for their citi@ens# Although intended to su&&ort &oor citi@ens, energy su4sidies are, 4y and large,
counter?&roductive# *hese su4sidies im&ose su4stantial fiscal, economic and environmental costs# Several studies have sho"n that
fossil?fuel su4sidies 4enefit high?income households more than the &oor# )emoving or reducing energy su4sidies "ould incentivi@e
energy efficiency and lo"er energy consum&tion# WFreen mercantilismW discourages investments of time, money and talent for
develo&ing ne" technologies# ;ut "e must also recogni@e that doing this is far from easy# Cor some lo"?income countries, crafting a
more effective social safety net that 4enefits lo"?income households "ould ease the difficult and &olitically fraught tas% of reducing
or eliminating fuel su4sidies# 0ur own political, economic, environmental and national
security interests depend on robust energy diplomacy and strong &artnershi&s to sei@e the
o&&ortunities and address the challenges "e all face# *hat is "hy the State De&artment "ill continue to
"or% across the glo4e in &artnershi& "ith others to hel& countries develo& and 4olster a variety of
ne" su&&lies and su&&liers, find o&&ortunities to manage the gro"ing glo4al thirst for energy, and ensure secure and
efficient means of energy trans&ort and transmission, as "ell as mitigate environmental damage and climate change#
conomic collapse incentivi:es war and conflict 3 t$is inevitably goes nuclear
Royal, 12, director of Coo&erative *hreat )eduction at the U#S# De&artment of Defense, 7D'D -.edediah, Economics of !ar and
Peace6 Economic, Begal, and Political Pers&ectives, &g 7'1?7'/, ?;)!9
Bess intuitive is ho" &eriods of economic decline may increase the li%elihood of eternal conflict# Political science literature has
contri4uted a moderate degree of attention to the im&act of economic decline and the security and defense 4ehavior of
interde&endent states# )esearch in this vein has 4een considered at systemic, dyadic and national levels# Several nota4le
contri4utions follo"# Cirst, on the systemic level, Pollins -7DDH9 advances Models%i and *hom&son>s -'88R9 "or% on
leadershi& cycle theory, finding that rhythms in the global economy are associated wit$ t$e rise
and fall of a pre#eminent power and t$e often bloody transition from one pre#
eminent leader to t$e next# As such, eogenous shoc%s such as economic crises could usher in a
redistri4ution of relative &o"er -see also Fil&in, '8H'9 that leads to uncertainty a4out &o"er
4alances, increasing the risk of miscalc ulation -Cearon '88/9# Alternatively, even a relatively certain
redistri4ution of &o"er could lead to a permissive environment for conflicts as a
rising power may see" to c$allenge a declining power -!erner, '8889# Se&arately, Pollins -'88R9
also sho"s that glo4al economic cycles com4ined "ith &arallel leadershi& cycles im&act the li%elihood of conflict among maAor,
medium and small &o"ers, although he suggests that the causes and connections 4et"een glo4al economic conditions and
security conditions remains un%no"n# Second, on a dyadic level, Co&eland>s -'88R, 7DDD9 theory of trade e&ectations suggest
that 2future e&ectation of trade5 is a significant varia4le in understanding economic
conditions and security 4ehavior of states# $e argues that interde&endent states are li%ely to gain &acific 4enefits
from trade so long as they have an o&timistic vie" of future trade relations# $o"ever, if the e&ectations of future
trade decline, particularly for difficult to replace item suc$ as energy resources ,
t$e li"eli$ood for conflict increases, as states will be inclined to use force to gain
access to t$ose resources' Crises could potentially be the trigger for decreased trade
expectations either on its own or because it triggers protectionist moves by interdependent
states . *hird, ot$ers $ave considered t$e lin" between economic decline and
external armed conflict at a national level' -lomberg and *ess C)22)@ find a
strong correlation between internal conflict and external conflic t, &articularly during
&eriods of economic do"nturn# *hey "rite, *he lin%ages 4et"een internal and eternal conflict and &ros&erity are strong and
mutually reinforcing# Economic conflict tends to s&a"n internal conflict, "hich in turn returns the
favor# Moreover, the &resence of a recession tends to am&lify the etent to "hich
international and eternal conflicts self?reinforce each other# -;lom4erg and $ess, 7DD7, &# H89
Economic decline has also 4een lin%ed "ith an increase in t$e li"eli$ood of terrorism
C-lomberg, *ess and Weerapana, )22=@, w$ic$ $as t$e capacity to spill across
borders and lead to external tensions# Curthermore, crises generally reduce the
&o&ularity of a sitting government# 2Diversionary theory5 suggests that, w$en facing
unpopularity arising from economic decline , sitting governments $ave
increased incentives to fabricate external military conflicts to create a 8rally
around t$e flagD effect# !ang -'88R9, De)ouen -'88/9 and ;lom4erg, $ess and *hac%er -7DDR9 find su&&orting
evidence sho"ing that economic decline and use of force are at least indirectly correlated# Fel&i -'88(9, Miller -'8889, and
Kisangani and Pic%ering -7DD89 suggest that the tendency to"ards diversionary tactics are greater for
democratic states than autocratic states due to the fact the democratic leaders are generally
more susce&ti4le to 4eing removed from office due to lac% of domestic su&&ort# De De)ouen
-7DDD9 has &rovided evidence sho"ing that &eriods of "ea% economic &erformance in the United States and thus "ea%
Presidential &o&ularity are statically lin%ed to an increase in the use of force# In summary, recent economic scholarshi&
&ositively correlates economic integration "ith an increase in the fre=uency of economic crises, "hereas &olitical science
scholarshi& lin%s economic decline "ith eternal conflict at systemic, dyadic and national levels# *his im&lied connection
4et"een integration, crises and armed conflict has not featured &rominently in economic?security de4ate and deserves more
attention# *his o4servation is not contradictory to other &ers&ectives that lin% economic interde&endence "ith a decrease in the
li%elihood of eternal conflict, such as those mentioned in the first &aragra&h of this cha&ter# *hose studies tend to focus on
dyadic interde&endence instead of glo4al interde&endence and do not s&ecifically consider the occurrence of and conditions
created 4y economic crises# As such the vie" &resented here should 4e considered ancillary to those vie"s#
Additionally it is reverse causal O increased economic gro"th ma%es "ar o4solete and acts as an
im&act filter to your disadvantages
.eudney, E, -A CE! :EA)S BA*E) $E C$ANFED $IS MIND A;<U* K !AXE *$E<):9 &rofessor of &olitical science at
.ohn $o&%ins et al, D8 PDaniel, and .ohn I%en4erry, &rofessor of international affairs at Princeton, Coreign Affairs,
htt&600"""#foreignaffairs#com0articles0R1(7'0daniel?deudney?and?g?Aohn?i%en4erry0the?myth?of?the?autocratic?revival?;)!9
*his 4lea% outloo% is 4ased on an eaggeration of recent develo&ments and ignores &o"erful countervailing factors and forces#
Indeed, contrary to "hat the revivalists descri4e, the most stri%ing features of the contem&orary international
landsca&e are the intensification of economic glo4ali@ation, t$ic"ening institutions, and
s$ared problems of interdependence# *he overall structure of the international system today is
=uite unli%e that of the nineteenth century# Com&ared to older orders, the contem&orary li4eral?centered
international order &rovides a set of constraints and o&&ortunities #of pus$es and pulls#
t$at reduce the likelihood of severe conflict "hile creating strong im&eratives for coo&erative
&ro4lem solving ' *hose invo%ing the nineteenth century as a model for the t"enty?first also fail to ac%no"ledge the etent
to "hich "ar as a pat$ to conflict resolution and great#power expansion $as become
largely obsolete # Most im&ortant, nuclear "ea&ons have transformed great?&o"er "ar from a
routine feature of international &olitics into an eercise in national suicide# !ith all of the great &o"ers
&ossessing nuclear "ea&ons and am&le means to ra&idly e&and their deterrent forces, "arfare among
t$ese states $as truly become an option of last resort # *he &ros&ect of such great losses has
instilled in the great &o"ers a level of caution and restraint t$at effectively precludes
ma;or revisionist efforts # Curthermore, the diffusion of small arms and the near universality of
nationalism have severely limited the a4ility of great &o"ers to con=uer and occu&y territory
inha4ited 4y resisting &o&ulations -as Algeria, Xietnam, Afghanistan, and no" Ira= have demonstrated9# Unli%e during the days
of em&ire 4uilding in the nineteenth century, states today cannot translate great asymmetries of &o"er
into effective territorial controlG at most, they can ho&e for loose hegemonic relationshi&s that re=uire them to give
something in return# Also unli%e in the nineteenth century, today the density of trade, investment, and
production networ"s across international borders raises even more t$e costs of
war ' A Chinese invasion of *ai"an, to ta%e one of the most &lausi4le cases of a future
interstate "ar, "ould &ose for the Chinese communist regime daunting economic costs, 4oth
domestic and international# *a%en together, these c$anges in t$e economy of violence
mean t$at t$e international system is far more primed for peace than the autocratic
revivalists ac%no"ledge#
(cenario two is Russia
Recent dispute over snowden and summit cancelation $as put t$e &'('#Russia
relations$ip on t$e roc"s
A5 13 - ;y Associated Press, Pu4lished6 .uly 'H a U&dated6 Criday, .uly '8, J67D AM Possi4le <4ama cancellation of Mosco"
tal%s could mean US, )ussia relations headed for ne" lo" htt&600"""#"ashington&ost#com0&olitics0courtsTla"0us?russia?
relations?could?4e?headed?for?ne"?lo"?if?o4ama?cancels?mosco"?tal%s?"ith?&utin07D'10D(0'H07(/ed8HD?fDDf?''e7?Hc1R?
DeHRH7//a8H8Tstory#html ? ;)!9
!AS$INF*<N E *he !hite $ouse is considering canceling a fall summit 4et"een President ;arac%
<4ama and )ussian President Xladimir Putin in Mosco", a move t$at would furt$er
aggravate t$e already tense relations$ip between t$e two leaders# *he !hite $ouse is
dangling that o&tion over the )ussians as Mosco" considers a tem&orary asylum &etition from Ed"ard
Sno"den, the American accused of lea%ing information a4out classified U#S# intelligence &rograms# ;ut officials have
&rivately signaled that scra&&ing the 4ilateral tal%s "ould also 4e retaliation for other areas of
disagreement "ith )ussia , including its continued su&&ort for Syrian President ;ashar Assad >s attac%s
against civilians# )egardless of "hat ha&&ens "ith Sno"den, the !hite $ouse says <4ama "ill still attend an international summit
in St# Peters4urg, )ussia# ;ut officials have gone out of their "ay in recent days to avoid &u4licly committing to the meetings in
Mosco"# 2*he &resident intends to travel to )ussia for the F7D Summit,5 !hite $ouse s&o%esman .ay Carney said# 2And I have no
further announcements to ma%e 4eyond "hat "e>ve said in the &ast a4out the &resident>s travel to )ussia in the fall#5 ;y sim&ly
considering cancellation of the tri&, the <4ama administration is indicating its concern the Kremlin
"ill allo" Sno"den to ta%e refuge in )ussia# *he !hite $ouse has called on )ussia to return the 1D?year?old
former government contract systems analyst to the U#S# "here he is facing es&ionage charges# Sno"den, in a
tem&orary asylum re=uest su4mitted 4y his la"yer *uesday, claimed he faces &ersecution from the U#S# government and could face
torture or death# Andre" Kuchins, director of the )ussia &rogram at the Center for Strategic and International Studies, said the
!hite $ouse>s cancellation threat could 4e effective leverage over Putin, "ho li%ely "ants to avoid an em4arrassment on the "orld
stage# 2!hen the s&otlight of the "orld is on him and )ussia, he doesn>t "ant that s&otlight to reveal a lot of negative things "hich
are going to 4e distractions,5 Kuchins said# Pulling the &lug on the U#S#?)ussia tal%s "ould dee&en the
tensions 4et"een the t"o leaders# And it would li"ely ma"e it even more difficult for t$e
two countries to find common ground on areas of disagreement t$at plague t$e
relations$ip ' *he U#S# accuses )ussia of &roviding military su&&ort to Assad that has allo"ed him to cling to &o"er during
more than t"o years of clashes "ith re4els see%ing to overthro" his government# *he U#S# dee&ly angered )ussia earlier this year
"hen it announced sanctions against 'H )ussians as &art of a la" named after Sergei Magnits%y, a )ussian la"yer "ho "as arrested
in 7DDH for ta evasion after accusing )ussian &olice officials of stealing V71D million in ta re4ates# )ussia also announced last year
that it "as 4anning U#S# ado&tions of )ussian children, a move seen as a retaliation for the Magnits%y act, &assed last year# <n
*hursday, the !hite $ouse also said it "as 2dee&ly disa&&ointed and concerned5 4y the conviction of )ussian o&&osition leader
Aleei Navalny, "ho challenged the Kremlin "ith e&osures of high?level corru&tion and moc%ed the leadershi& "ith 4iting satire#
$e "as sentenced to five years in &rison *hursday in a verdict that fueled street &rotests near )ed S=uare and dre" condemnation
from the !est# Kuchins said that "hile granting Sno"den asylum "ould certainly 4e the im&etus for canceling <4ama>s Mosco"
tri&, it "ould not 4e the only reason# 2It "ould 4e saying at least t"o things to the )ussians,5 Kuchins said# 2*hat granting asylum to
Ed"ard Sno"den "as a 4ridge too far, and secondly that "e don>t feel li%e "e>re actually losing so much out of the cancellation of the
summit 4ecause "e didn>t e&ect to get much out of it#5 Some U#S# la"ma%ers are calling on <4ama to go 4eyond sim&ly canceling
his tal%s "ith Putin# Sen# Bindsey Fraham, )?S#C#, has also called on the U#S# to 4oycott net year>s !inter <lym&ics scheduled for
Sochi, )ussia#
nergy diplomacy is critical to stabili:ing Russian Relations t$roug$ inter#
governmental cooperation 3 t$is facilitates a peaceful transition from
Russia6s unsustainable energy model and spills over into broader relations
4oug$ 11 -)ussia>s Energy Di&lomacy .ohn Bough Associate Cello", )ussia and Eurasia Programme a May 7D''
htt&600"""#chathamhouse#org0sites0default0files0'81/7TD/''4&Tlough#&df ? ;)!9
)ussia>s vast energy resources are a mainstay of its foreign &olicy and an essential source of its current
&olitical &o"er &roAection and international &restige# *hese resources can act as a source of economic
attraction for neigh4ours and &artners# *hey are a significant factor in 4ilateral relations "ith neigh4ours that
can 4e traded for &olitical and economic 4enefit # Russia also uses its energy relations as a
means of ac$ieving economic and political influence through non?traditional and non?
trans&arent mechanisms# At times, )ussia em&loys energy in coercive "ays and to 4uild &atterns of de&endence# !hile
)usssia>s energy e&orts give it international clout, the current develo&ment and e&ort model
has created a dynamic that has undermined trust and at times created counter&roductive
outcomes "ith 4oth CIS and EU countries# *he changing eternal environment and &ressures to
develo& ne" )ussian sources of oil and gas &roduction may force changes# )ussia may 4e
&ushed to run its energy sector more efficiently "ith greater foreign investment, closer relations "ith
foreign &artners and increased mutual mar%et access# If this ha&&ens, )ussia might develo& a =ualitatively different
energy?4ased influence across a much "ider area# Energy is a mainstay of )ussia>s foreign &olicy and an essential
source of its current &olitical &o"er &roAection and international &restige# ' !ithout its a4ility to &roduce and su&&ly energy, )ussia
"ould not have the status it has today# It "ould not have the same influence as a FH mem4er, it "ould not command the attention of
the United States as it does, and it "ould not have the same &rivileged relations "ith several leading Euro&ean Union countries,
nota4ly Fermany# It "ould also 4e of less interest to China# )ussia has the "orld>s largest natural gas reserves,
the second largest coal reserves and seventh largest oil reserves# It is the largest e&orter of natural gas, and
since 7DD8 has &eriodically overta%en Saudi Ara4ia as the "orld>s largest oil &roducer# It currently su&&lies around 1D[ of the oil
and 7/[ of the gas that the EU consumes, and is also a signifi cant glo4al force in the nuclear &o"er industry# )ussia>s use of energy
resources as a source of &o"er &roAection reflects a change over the &ast 7D years that has seen a significant decline in em&hasis on
the role of nuclear "ea&ons# Crom the late '8RDs, "hen the USS) 4ecame an increasingly im&ortant oil and gas su&&lier to "estern
Euro&e, and u& to the end of the Soviet &eriod, energy rela tions had a different &lace in Mosco">s foreign &olicy# A sym4ol of
reduced &olitical tensions, they &rovided a source of hard currency for the USS) and an im&ortant tool of commercial engagement,
&articularly "ith !est Fermany# Cor the USS) to have used them for &olitical &ur&oses in a system of mutual restraint im&osed
4y nuclear "ea&ons "ould have desta4ili@ed security relations "ith the !est and damaged the Soviet economy# No"
that )ussia>s &o"er derives far less from military power than in the days of the USS), energy
relations are a different and much more flei4le tool of influence # In 4road terms, they serve as6 @
a source of economic attraction for neigh4ours and &artners, @ a significant factor in 4ilateral relations "ith
neigh 4ours that can 4e traded for economic and &olitical 4enefit and sometimes ta%es the form of coercion, and @ a means of
achieving economic and &olitical influence through non?traditional and sometimes non?trans &arent
mechanisms# )ussia>s energy relations can 4e used in different "ays to eert influence at
different levels of intensity# *heir influ ence is strongest in the Common"ealth of Inde&endent
States -CIS9 4ut it etends far into Euro&e too# *here is &ronounced influence in some EU
countries, &articularly Fermany and some ne" mem4er states "hose de&end ence on )ussian
energy su&&lies develo&ed during Soviet times on the 4asis of Soviet?4uilt infrastructure and
favoura4le &ricing arrangements Since coming to &o"er Xladimir Putin has sho"n consid
era4le s%ill at integrating foreign &olicy and energy &olicy to leverage )ussia>s advantage 4oth as
a holder of hydro car4on resources and as a very im&ortant and ca&a4le &roducer in its o"n
right# $is understanding of 4oth areas of &olicy and their overla& has made him a difficult
negotiating &artner for Euro&ean leaders# No !estern leader has a level of %no"ledge of the
international energy 4usiness com&ara4le to Putin>s, 4ased on his strong interest in Fa@&rom#
*he )ussian understanding of the overla& 4et"een its energy and foreign &olicies "as reflected
in the 7DD1 Energy Strategy, "hich noted that )ussia>s Nsignificant energy resources and
&o"erful fuel?energy com&le> "as Nan instrument for conducting domestic and foreign &olicy>
and that Nthe role of the country on glo4al energy mar%ets to a great degree deter mines its
geo&olitical influence># 7 Crom 7DDJ )ussia 4enefited from a steady increase in the glo4al oil
&rice that transformed its international &osition and fuelled a level of economic gro"th that "as
unimagi na4le in the late '88Ds# *his &rofoundly changed the attitude of )ussia>s leaders
to"ards neigh4ours and &artners# !hen Putin 4ecame &rime minister in '888 the &rice of ;rent
crude "as Aust under V'H a 4arrel# In .uly 7DDH it hit V'J(# *here "as over?enthusiastic tal% of
Fa@&rom 4ecoming a trillion?dollar com&any and the 4iggest cor&oration in the "orld# *his
coincided "ith a &ea% in )ussian foreign &olicy influence, demonstrated 4y Putin>s outs&o%en
&erformance at the NA*< Summit in ;ucharest in 7DDH, follo"ed 4y )ussia>s incursion into
Feorgia a fe" months later# In a matter of months this "ildly o&timistic &rognosis a4out
Fa@&rom came 4ac% to haunt )ussia>s leaders# !ith the glo4al economic crisis, the &rice of oil
had dro&&ed to 4elo" VJ/ 4y Decem4er 7DDH# *his e&osed as hollo" the 4elief of many of
)ussia>s economic &olicy?ma%ers that the country "as a Nsafe haven># *his a4ru&t change in
economic fortunes, al4eit "ithout a &rolonged crisis at home, tem&ered )ussia>s a&&roach to its
use of energy in its foreign relations# No"here is this more visi4le than in the area of gas e&orts, 4y far the
most &o"erful element of )ussia>s energy influence# Fa@&rom>s cash?flo" situation in 7D'D "as very far from "hat it "as in 7DDH#
Am4itions for do"nstream ac=uisitions and gro"th have 4een scaled 4ac% in line "ith investments in ca&ital e&enditure# 1 At the
same time, there have 4een &rofound changes in the structure of the Euro&ean gas mar%et, "hich is the source of roughly t"o?thirds
of Fa@&rom>s revenues from the sales of one?third of its &roduction# Fa@&rom is dis&ro &ortionately de&endent on the Euro&ean gas
mar%et# !ith *ur%ey included, it accounts for over 8/[ of Fa@&rom>s non?CIS e&orts# <il and li=uefied natural gas
-BNF9 can 4e glo4ally traded in a "ay that &i&eline gas cannot# In short, there have 4een signs for several
years that the relationshi& of gas interde&endence 4et"een Euro&e and )ussia has 4een evolving in a "ay that is
not conducive to )ussian interests# *his is des&ite strong &ressure from )ussia and some of Fa@&rom>s allies in
Euro&e to counter this trend# Euro&ean concerns a4out overde&endence on )ussian gas in the face of decreasing indigenous gas
&roduction have started to recede for a num4er of reasons# *hese include the current glut of BNF as a result of the use of
revolutionary gas &roduction technologies in the United States to develo& &reviously inaccessi4le uncon ventional gas, as "ell as EU
rene"a4le energy &olicies and im&roved interconnections in res&onse to the 7DDR and 7DD8 gas crises 4et"een )ussia and U%raine#
*hese are not the only factors in &lay, ho"ever# *he &rotected terms of trade for the Euro&ean gas 4usiness that develo&ed in the
'8(Ds have started to unravel# NUn4undling> of &roduction and trans&ortation assets, &rovision of third&arty access to &i&eline
infrastructure, as "ell as moves to limit ca&acity reservations in &i&elines, all mar% significant change in mar%et rules and &ractices#
Com4ined "ith the start of a move a"ay from oil?indeed &ricing as demon strated 4y the em4ryonic s&ot mar%et for gas, this is
ma%ing life less comforta4le for maAor investors in the gas 4usiness# Fa@&rom>s &artners such as E#oN, )!E and Fasunie have seen
their 4usiness models come under ne" &ressures and have 4een forced to ada&t to the changing realities# In short, Fa@&rom faces a
much more uncertain situation in Euro&e as com&etition from other sources &uts &ressure on &rices# Several maAor Euro&ean 4uyers
of )ussian gas have negoti ated discounts on their long?term contracts in res&onse to lo"er s&ot &rices# Fa@&rom is understanda4ly
concerned at the erosion of the traditional model in "hich guaranteed demand from Euro&ean customers under&inned u&stream
investments# *he limited diversity of sources to the Euro&ean mar%et effectively gave Fa@&rom and its esta4lished &artners the
o&&ortunity to restrict the su&&ly of gas to the Euro&ean mar%et and %ee& &rices high# U& to 7DD(0DH Fa@&rom>s Euro&ean
customers "ere =ueuing u& to etend their longterm contracts amid concerns a4out long?term gas su&&ly to the Euro&ean mar%et#
*his &eriod may &rove to have 4een a high?"ater mar% of )ussian influence on Euro&ean energy &olicy# According to the )ussian
Energy Strategy to 7D1D , )ussia "ill devote more effort to increasing mar%et share for its
hydrocar4ons -including &i&eline gas and BNF9 in Asia than in Euro&e, 4ecause Euro&e is regarded as a
mature mar%et for gas# J *o maintain its mar%et &osition in Euro&e, Fa@&rom "ill have to com&ete "ith a range of other sources# At
the same time, it "ill &ursue asset s"a&s "ith Euro&ean com&anies to strengthen its do"nstream &osition to secure demand and
etract additional rent# / )ising confidence encourages )ussia>s use of the energy card )ising &rices in the early &art of the last
decade, coin ciding "ith concerns a4out future energy 4alances, gave )ussia a s&ring4oard to re?esta4lish its &osition as a maAor
&o"er# E&ort revenues aside, foreign countries 4egan to vie" )ussia differently 4y virtue of its a4undance of oil and gas reserves
and its record of su&&ly to glo4al mar%ets# It is fair to say that if )ussia had not 4oosted its oil &roduction from 7DD1, the glo4al
economy "ould not have 4een a4le to co&e "ith the increased demand from the Asian economies# In this res&ect, )ussia made a
very significant contri4ution to glo4al energy security, "hich "as em&hasi@ed 4y its FH chairmanshi& in 7DDR# *his reflected
recognition 4y the )ussian leadershi& that it held an im&ortant card "hich no other country could match# )ussia>s leaders also
sa" that the country "as a4le to use its energy influence to strengthen its &ositions in the CIS and forge a ne"
ty&e of relationshi& "ith the EU and the United States # *he energy dialogues esta4lished "ith the EU
-7DDD9 and United States -7DD19 4ore little fruit, 4ut )ussia had discovered that energy coo&eration "as
highly attractive to a num4er of Euro&ean governments and could 4e used to influence their
relations "ith )ussia# *he EU>s difficulty in finding a Nsingle voice> to deal "ith )ussia on energy issues is testimony to
Mosco">s di&lo matic achievements# It offered !estern governments a deal6 invest in the )ussian energy sector
according to our rules and in return allo" )ussian energy com&anies to invest in your countries# *he energy consultancy CE)A has
descri4ed this as )ussia>s N4ar4ell strategy>6 Euro&ean investment in )ussia>s u&stream "ith )ussian &artici&a tion in the
Euro&ean do"nstream connected 4y &i&eline# R It is fair to say that )ussia is still learning to 4alance energy among its foreign &olicy
instruments# )ecent history sho"s that as a source of influence, energy resources can 4e easily overused# As a result, they can re&el
as "ell as attract# *heir ca&acity to create counter&roductive outcomes for )ussia has 4een &articularly visi4le among EU countries
follo"ing the gas crises of 7DDR and 7DD8 4et"een )ussia and U%raine# In terms of foreign investment, )ussia is still trying to
4alance its needs "ith its desire for control, as demonstrated 4y the 7DDH Ba" on Coreign Investment in Strategic Sectors, "hich
hardly offers a red car&et to foreign energy com&anies# In the case of China, energy resources have &resented a dilemma for )ussia6
to su&&ly or notU Des&ite a firm inten tion e&ressed in 7DDR 4y President Putin to su&&ly (D 4illion cu4ic metres a year of &i&eline
gas to the Chinese mar%et 4eginning in 7D'', and an a4undance of gas reserves in East Si4eria, )ussia still a&&ears hesitant a4out
esta4lishing gas coo&eration "ith China# *here are some grounds to 4elieve that Fa@&rom has 4een reluctant to commit gas volumes
from East Si4eria to China for fear that they might 4e needed to 4ac%fill the gas su&&ly system else"here in )ussia# Nevertheless,
over recent years Fa@&rom senior eecu tives have occasionally raised the &ros&ect of diverting the focus of )ussian gas e&orts from
Euro&e to China 4ecause of changing EU regulations# At &resent, the &ros&ects for oil e&orts are much 4etter6 a s&ur from )ussia>s
Eastern Si4eriaOPacific <cean &i&eline -ESP<9 to China has 4een com&leted and regular deliveries are due to start in 7D''#
$o"ever, it is clear that )ussia continues for the moment to have dou4ts a4out Chinese investment in its energy sector and has
favoured !estern com&anies over their Chinese counter&arts# China has Aust one significant u&stream investment in )ussia O a J8[
sta%e in Udmurtneftega@ that has not &roved a success# China has, ho"ever, 4een instrumental in &roviding loans to )osneft,
including a V7/4n &ac%age &rovided to )osneft and *ransneft in return for a 1DD,DDD 4arrel &er day oil su&&ly agreement to run for
7D years from 7D''# At the same time, there are signs of increased coo&eration around &roAects related to coal, nuclear energy and
electricity# Cor the moment, energy coo&eration "ith China and the rest of Asia is at an early stage# !hile
concerns a4out the im&lications of further Chinese economic gro"th for )ussia may constrain the )ussian desire to
develo& a full?4looded energy relation shi&, there is no reason "hy )ussia cannot develo& an energy 4usiness in Asia
to balance its position in Euro&e# Similarly, energy coo&eration "ith India is no" a focus of interest# *his is
reflected in the signing of a num4er of agreements in the oil, gas and nuclear fields in Decem4er 7D'D#
E&ansion into the Indian mar%et is logical for )ussia given the vast o&&ortunities, and 4alances its efforts to 4uild a long?term
&osition as an energy su&&lier to the main Asia?Pacific mar%ets# It already su&&lies BNF to .a&an and South Korea# )ussia has
also sho"n interest in develo&ing energy coo&eration -including nuclear9 "ith a num4er of coun tries in Africa,
including Angola, Egy&t, Nami4ia, Nigeria and South Africa# *his is a logical effort to e&and )ussia>s trade relationshi&s using its
&rime e&ort commodities, in some cases 4uilding on e&erience from Soviet days# Energy resources as a source of attraction Fiven
)ussia>s a4undance of energy resources, including its strong nuclear energy ca&a4ilities, the country attracts interest from a "ide
range of foreign governments and com&anies# *his is reci&rocated 4y )ussia>s interest in e&loiting energy resources to access a
range of foreign mar%ets# *he &icture is diverse since )ussia>s energy sector remains tightly integrated "ith the CIS and ;altic coun
tries through shared infrastructure from Soviet days# !hile this gives it a significant lever in relations "ith some of these countries,
)ussia also relies on ;elarus, U%raine and Estonia for access to its foreign mar%ets# Interest in commercial o&&ortunities "ith
)ussian com&anies 4oth inside and outside the country has encour aged a range of leading international energy com&anies to invest
in the )ussian energy sector# Russia $as an interest in attracting "orld?class com&anies to "or% in
&artner shi& "ith it to develo& its resource 4ase and to 4enefit from investment and transfers of
technology and s%ills# *his has already 4rought some significant 4enefits at home# *he offshore Sa%halin develo&ments
"ould not have 4een &ossi4le "ithout EonMo4il and Shell# !estern com&anies> interests inevita4ly 4ecome &art of their
governments> considerations in a&&roaching )ussia# *here is no 4etter eam&le than Fermany, "here there has 4een little change in
su4stance 4et"een Chancellor Ferhard Schrbder>s handling of )ussia and that of his successor, Angela Mer%el, des&ite their very
different &olitical &ositions# ;oth have su&&orted the contentious Nord Stream &i&eline &roAect that "ill 4y&ass ;elarus, Poland and
U%raine to 4ring )ussian gas directly to Fermany# ;oth have 4ac%ed the e&ansion of coo& eration 4et"een Ferman and )ussian
energy com&anies# ;oth have tried to limit restrictions on asset ac=uisi tions 4y )ussian energy com&anies in EU countries and, to
different degrees, have soft?&edalled concerns a4out )ussia>s &olitical direction and 4ehaviour in its &eri&hery# At the same time,
Fermany>s E#oN )uhrgas and ;ASC0 !intershall have dee&ened "hat are the closest relation shi&s "ith Fa@&rom among Euro&ean
com&anies, 4uilt u& over decades "ith considera4le s%ill and &ersistence#
And, sustained &'('#Russian relations are vital to preventing nuclear war and de#
escalating global conflict
Allison F -lac"will, 611 PFraham, director of the ;elfer Center for Science and International Affairs at $arvard>s
Kennedy School, former assistant secretary of defense in the Clinton administration, )o4ert D#, $enry A# Kissinger senior fello" for
U#S# foreign &olicy ?? Council on Coreign )elations, served as U#S# am4assador to India and as de&uty national security adviser for
strategic &lanning in the ;ush administration, 4oth co?chairmen of the *as% Corce on )ussia and U#S# National Interests, co?
s&onsored 4y the ;elfer Center and the Center for the National Interest, 'D?1D?'' Politico, 2'D reasons "hy )ussia still matters,5
htt&600dyn#&olitico#com0&rintstory#cfmUuuidZ'R'EC7H7?(7C8?JDJH?H;8C?C/;118RCADERQ
*hat central &oint is that )ussia matters a great deal to a U#S# government see%ing to defend and advance its
national interests# Prime Minister Xladimir Putin>s decision to return net year as &resident ma%es it all the more critical for
!ashington to manage its relationshi& "ith )ussia through coherent, realistic &olicies# No one denies that )ussia is a
dangerous, difficult, often disa&&ointing state to do 4usiness "ith# !e should not overloo% its many human rights and legal
failures# Nonetheless, )ussia is a &layer "hose choices affect our vital interests in nuclear security and
energy ' %t is "ey to supplying 122,222 &'(' troops fig$ting in Afg$anistan and preventing
%ran from ac!uiring nuclear weapons' *en realities re=uire U#S# &olicyma%ers to advance our nation>s interests
4y engaging and "or%ing "ith Mosco"# Cirst, )ussia remains t$e only nation t$at can erase t$e & nited
( tates from t$e map in 32 minutes ' As every &resident since .ohn C# Kennedy has recogni@ed, Russias
cooperation is critical to averting nuclear war . Second, )ussia is our most conse!uential partner in
preventing nuclear terrorism' T$roug$ a com4ination of more than V'' 4illion in U#S# aid, &rovided through
the Nunn?Bugar Coo&erative *hreat )eduction &rogram, and im&ressive )ussian &rofessionalism, t"o decades
after the colla&se of the 2evil em&ire,5 not one nuclear "ea&on has 4een found loose# *hird, Russia plays
an essential role in preventing the proliferation of nuclear weapons and missile?delivery systems# As
!ashington see%s to sto& Iran>s drive to"ard nuclear "ea&ons, )ussian choices to sell or "ithhold
sensitive technologies are the difference 4et"een failure and the &ossi4ility of success# Courth, )ussian
su&&ort in s$aring intelligence and cooperating in operations remains essential to the U.S.
war to destroy Al aeda and combat other transnational terrorist groups . Cifth, )ussia &rovides a vital
su&&ly line to 'DD,DDD U#S# troo&s fighting in Afghanistan# As U#S# relations "ith Pa%istan have
deteriorated, the )ussian lifeline has gro"n ever more im&ortant and no" accounts for half all daily
deliveries# Sith, )ussia is the "orld>s largest oil &roducer and second largest gas &roducer# <ver the &ast
decade, )ussia has added more oil and gas e&orts to "orld energy mar%ets than any other nation# Most maAor energy trans&ort
routes from Eurasia start in )ussia or cross its nine time @ones# As citi@ens of a country that im&orts t"o of every
three of the 7D million 4arrels of oil that fuel U#S# cars daily, Americans feel )ussia>s im&act at our gas
&um&s# Seventh, Mosco" is an im&ortant &layer in today>s international system# It is no accident that
)ussia is one of the five veto?"ielding, &ermanent mem4ers of the U#N# Security Council, as "ell as a
mem4er of the F?H and F?7D# A Moscow more closely aligned wit$ &'(' goals would be
significant in the balance of power to sha&e an environment in "hich China can emerge as a glo4al
&o"er wit$out overturning t$e existing order' Eighth, )ussia is the largest country on Earth 4y
land area, a4utting China on the East, Poland in the !est and the United States across the Arctic# *his
territory &rovides transit corridors for su&&lies to glo4al mar%ets "hose sta4ility is vital to the U#S#
economy# Ninth, )ussia>s 4rain&o"er is reflected in the fact that it has "on more No4el Pri@es for science than all of Asia,
&laces first in most math com&etitions and dominates the "orld chess masters list# *he only "ay U#S# astronauts can no" travel
to and from the International S&ace Station is to hitch a ride on )ussian roc%ets# *he co?founder of the most advanced digital
com&any in the "orld, Foogle, is )ussian?4orn Sergei ;rin# *enth, Russias potential as a spoiler is difficult to
exaggerate. Consider "hat a )ussian &resident intent on frustrating U#S# international o4Aectives
could do E from sto&&ing the su&&ly flo" to Afghanistan to selling S?1DD air defense missiles to
*ehran to Aoining China in &reventing U#N# Security Council resolutions# So net time you hear a
&olicyma%er dismissing )ussia "ith rhetoric a4out 2"ho caresU5 as% them to identify nations that
matter more to U#S# success, or failure, in advancing our national interests#
)ac solves energy diplo
(trengt$ening oil sector development is "ey to development of energy governance
and cooperation
+e"uta 13 -)o4ert C# Ce%uta Princi&al De&uty Assistant Secretary, ;ureau of Energy )esources <ffshore *echnology
Conference $ouston, *L May 8, 7D'1 htt&600"""#state#gov0e0enr0rls0rem07D'107D8'8'#html ? ;)!9
Bet me 4egin 4y than%ing the <ffshore *echnology Conference and the U#S# De&artment of
Commerce for organi@ing this event and for offering this o&&ortunity to discuss our &ers&ectives
on the im&ortance of the oil and gas sector in Myanmar, as "ell as U#S# engagements in this
area# !e are all here 4ecause "e share a sense of the tremendous &otential in the regionG "e all
sense the o&&ortunity to turn the corner in a lasting and res&onsi4le manner# President <4ama>s
historic tri& in Novem4er highlighted the continued &rogress Myanmar is ma%ing on %ey
reforms, including "ith regard to human rights# *he United States Fovernment is "or%ing hard
to su&&ort President *hein Sein, others in his government, and all those loo%ing to hel& the
country as it continues do"n the &ath of democratic reform# A vital element of these reforms "ill
4e to strengthen and moderni@e the countryIs management of its natural resources, in &articular "ithin
the oil and gas sector# !e continue to "or% closely "ith the government to identify "here "e can 4e of assistance in hel&ing
Myanmar reach the ultimate goal of creating a trans&arent, "ell?managed energy sector that can attract the many
res&onsi4le, highly regarded oil and gas com&anies that are re&resented here in this room# *urning &articularly
to U#S# oil and gas com&anies ?? "e are certain that, given all of your e&ertise and ca&a4ilities, you have &roven around the "orld
that your &artici&ation "ill set a model for res&onsi4le investment and 4usiness o&erations as "ell as contri4ute to further reform
and &romote economic develo&ment and contri4ute to the "elfare of the &eo&le# *he U#S# government is dedicated to doing
everything it can to "or% "ith you to encourage and su&&ort res&onsi4le investment# !e "ant U#S# com&anies to invest and to do so
in a socially and environmentally res&onsi4le manner that can serve as a model for others and 4enefit all of the &eo&le in the
community# !ith that said, "e have &aired our actions to ease sanctions "ith &utting in &lace re&orting re=uirements for U#S#
com&anies that encourage res&onsi4le investing, including "ith regard to &romoting trans&arency and res&ect for human and la4or
rights, as "ell as su&&orting sound environmental &ractices, and land use# Although the country has one of the "orld>s oldest oil
sectors, "ith &roduction stretching 4ac% into the mid?'HDDs, it also contains si@a4le undiscovered oil and gas resources and
&roduction &otential, &articularly in the dee& "ater# *he o&&ortunities for &otentially massive additional revenue
from these resources are very &romising, 4ut "e have to recogni@e instances of conflict and human rights a4uses associated
"ith the etractive industries ma%e sound energy sector governance and trans&arency a &riority for our
4ilateral engagement# In order to hel& sha&e the dee&"ater licensing round no" under"ay, last Decem4er the State
De&artment, under the aus&ices of our Energy ;ureau>s Energy Fovernance and Ca&acity Initiative -EFCI9 hosted the Ministers of
Energy and of Mines, as "ell as the Managing Director of the state?o"ned hydrocar4on com&any, M<FE, in Ne" <rleans and in
!ashington to tal% a4out the countryIs governmentIs &lans and a4out 4est &ractices in trans&arent oil and gas sector licensing and
to "itness an offshore lease sale for the Fulf of Meico# *he Energy Fovernance and Ca&acity Initiative has 4een a tool used
"ith a num4er of countries around the "orld to &rovide targeted hel& on &articular matters
&ertaining "ith ho" governments deal "ith &articular legal, regulatory, or other matters in
overseeing their oil and gas sectors# *he tri& "as very "ell received and "e ho&e that some of the &ractices and ideas
o4served and discussed here in the United States "ill &rove useful and ma%e their "ay into the licensing &ractices under"ay no"#
*his "as not a one?off event, and "e "ill continue to engage "ith the government under our EFCI &rogram# Moving for"ard "e loo%
to engage "ith the Ministry of Energy and M<FE on legal reforms, sector management, and financial accounta4ility &rocesses#
*here are of course many ongoing international efforts to enhance trans&arency and strengthen energy governance "ithin the
country, and "e ma%e every effort to have our efforts com&lement those 4roader international &rograms# *he most &rominent
eam&le is the Etractive Industries *rans&arency Initiative -EI*I9# !e su&&ort and encourage the country>s &rogress to"ards EI*I
im&lementation, and are encouraged that they &lan to send a large, high level delegation to the EI*I Flo4al Conference in Sydney in
May# -And let me add a note here that as a mem4er of the EI*IIs ;oard, I &articularly ho&e "e "ill have a chance to tal% further in
Sydney "ith your countryIs delegation#9 Energy relations 4et"een our t"o governments "ill not, and should not,
4e limited to the oil and gas sector# Indeed, the oil and gas sector should not and cannot 4e isolated from the larger
energy sector in the country# As &rotests in )angoon made clear last year, the e&ectation of citi@ens that their government "ill
&rovide electricity to a greater &ortion of the country is of &aramount im&ortance# *he country has Asia>s lo"est electrification rate
at only 7( &ercent# Its significant gas resources can hel& meet gro"ing demand, 4ut the country
currently lac%s the legal, regulatory, and &hysical infrastructure to utili@e effectively and to
o&timi@e this resource# *he U#S# government, therefore, is "or%ing "ith the !orld ;an% and the Asian
Develo&ment ;an% to develo& &o"er sector and rural electrification investment &lans, in coordination "ith
the UN>s Sustaina4le Energy for All initiative# It is our &rofound ho&e that the gas that your com&anies "ill find and develo& "ill not
only ma%e your investments "orth"hile, 4ut "ill also hel& &o"er a more inclusive and self?sustaining electrical
&o"er grid "ithin the country *he State De&artment and Em4assy are here to assist and &artner "ith the country in order to act
u&on the ne" and eciting o&&ortunities that are 4eing generated through the ongoing &olitical and economic reforms#
Fovernments, the &rivate sector, and most im&ortantly the &eo&le "ill 4enefit from sound, sustaina4le develo&ment of the countryIs
hydrocar4on resources# In the com&le and ne" environment 4efore us, it is critically im&ortant that "e thin% ho"
4est to &artner to ensure sta4ility and hel& achieve &ros&erity in the years to come# U#S#
investors, &roducers, su&&ly com&anies come "ith unmatched e&erience, technological %no"?
ho", creativity and driveG they come "ith a record of achievement and success in dealing "ith challenges in the energy
sector around the "orld# *hey are interested in 4ringing this e&erience, this e&ertise, this s&irit to hel& Myanmar and its &eo&le
ca&ture the 4enefits of the countryIs resources# *here are great o&&ortunities for mutual 4enefit, and I %no" the
U#S# com&anies here "ill do their due diligence and invest res&onsi4ly for the &ros&erity of all of the &eo&le, restoring the country to
its traditional role at the crossroads 4et"een East and South Asia#
)ac impact filter
nergy .iplomacy is an impact filterGit6s reverse casual and prevents t$e
escalation of conflict
+linton 1) former Secretary of State -$illary )odham Clinton, 2 Energy Di&lomacy in the 7'st Century5 <cto4er 'H, 7D'7,
htt&600"""#state#gov0secretary0rm07D'70'D0'8811D#htm9 00K:
;ut let me start "ith the 4asics# Energy matters to America>s foreign &olicy for three fundamental reasons# Cirst, it
rests at the core of geo&olitics, 4ecause fundamentally, energy is an issue of "ealth and &o"er, "hich
means it can 4e 4oth a source of conflict and coo&eration# *he United States has an interest in
resolving dis&utes over energy, %ee&ing energy su&&lies and mar%ets sta4le through all manner of glo4al
crises, ensuring that countries don>t use their energy resources or &roimity to shi&&ing routes to force
others to 4end to their "ill or forgive their 4ad 4ehavior, and a4ove all, ma%ing sure that the American &eo&le>s
access to energy is secure, relia4le, afforda4le, and sustaina4le# Second, energy is essential to
ho" "e "ill &o"er our economy and manage our environment in the 7'st century# !e therefore have
an interest in &romoting ne" technologies and sources of energy O es&ecially including rene"a4les O to reduce &ollution, to diversify
the glo4al energy su&&ly, to create Ao4s, and to address the very real threat of climate change# And third, energy is %ey to
economic develo&ment and &olitical sta4ility# And "e have an interest in hel&ing the '#1 4illion &eo&le
"orld"ide "ho don>t have access to energy# !e 4elieve the more they can access &o"er, the 4etter their
chances of starting 4usinesses, educating their children, increasing their incomes, Aoining the glo4al economy O all of
"hich is good for them and for us# And 4ecause corru&tion is often a factor in energy &overty as "ell as &olitical insta4ility, "e
have an interest in su&&orting leaders "ho invest their nations> energy "ealth 4ac% into their
economies instead of hoarding it for themselves#
)ac iran
nergy diplomacy solves %ranian 5roliferation
+linton 1) -Energy Di&lomacy in the 7'st Century )emar%s *illary Rod$am +linton Secretary of State
Feorgeto"n University !ashington, DC <cto4er 'H, 7D'7 htt&600"""#state#gov0secretary0rm07D'70'D0'8811D#html ?;)!9
Security is also at the heart of &erha&s the most im&ortant energy di&lomacy "e have conducted in the <4ama
Administration# I>m sure you %no" that the United States and the Euro&ean Union and other li%eminded
countries, as "ell as the United Nations, have im&osed sanctions on Iran as &art of our dual?trac%
di&lomatic effort to &ersuade or com&el Iran to sto& its &ursuit of a nuclear "ea&on# :ou may also
%no" that a maAor target of these sanctions is Iran>s oil industry# !hat you may not %no", 4ecause it doesn>t ma%e headlines, is ho"
much &ainsta%ing di&lomacy "ent into ma%ing these sanctions first, ado&ted, and then, effective# Cirst, "e needed to convince
consumers of Iranian oil to sto& or significantly reduce their &urchases# At a time "hen demand for energy is high,
many countries understanda4ly "ere "orried that reducing their &urchases "ould &ut them in a very
difficult &osition# So at the same time, "e reached out to other maAor oil &roducers to encourage them to increase &roduction
so countries "ould 4e a4le to find alternative sources of oil# *hat "as further hel&ed 4y the fact that here in the United States "e
increased oil &roduction 4y nearly (DD,DDD 4arrels a day# And "e engaged countries on the 4enefits of diversifying their energy
su&&ly as a national security matter# *he a&&roach has "or%ed# *he EU &ut an oil em4argo into &lace in .uly, and "e have certified
that every single one of Iran>s oil im&orters have either significantly cut or com&letely ended their &urchases of Iranian oil# !e>ve
4een a4le to &ut un&recedented economic &ressure on Iran, "hile minimi@ing the 4urdens on the rest of the "orld# No" this strategy
influenced our engagement in other &laces too O for eam&le, Sudan and South Sudan, "here the oil had sto&&ed flo"ing and
getting it going again mattered to 4oth of them and to us# ;oth countries> economies de&end on oil# No" most of the oil lies in the
ne" country of South Sudan# ;ut in order to e&ort that oil, South Sudan needs &i&elines and &orts, "hich Sudan controls# *he t"o
countries "ere fighting over ho" much money South Sudan "ould &ay to Sudan to use that infrastructure# *hey "ere so far a&art, a
com&romise seemed im&ossi4le# So the United States ste&&ed u& our engagement in su&&ort of the African Union and the United
Nations to avoid a return to "ar 4et"een the t"o countries, to hel& 4oost their economies, and to restart oil &roduction at a critical
moment for the "orld>s oil su&&ly# *his &ast August I fle" to .u4a, the ca&ital of South Sudan, to urge the &arties to recogni@e that a
&ercentage of something is 4etter than a &ercentage of nothing# And a month later, they signed a coo&eration agreement, and it "as
ratified 4y the t"o &arliaments this "ee%# No" the situation is still fragile, and there are many other difficulties that they have to
"or% out 4et"een themselves# ;ut this "as a ste& for"ard, and I "ant to commend 4oth sides for their leadershi& and courage#
!e>ve also "or%ed intensively to su&&ort Ira=>s energy sector# In 7D'D, Ira= &roduced a4out 7#1 million 4arrels of oil each day#
*oday, that num4er is 1#7 million# And Ira= is no" the num4er t"o oil &roducer in <PEC, sur&assing Iran# *his is a maAor Ira=i
success story, hel&ed 4y the De&artments of State and Energy# !e "or%ed "ith the Ira=is to identify 4ottlenec%s in their energy
infrastructure, to im&rove their investment &lans, and get more oil to the mar%et# And there>s no =uestion that Ira=>s increased
&roduction has hel&ed sta4ili@e oil mar%ets at this &ivotal moment, and it &rovides a foundation for a stronger economy to 4enefit
the Ira=i &eo&le# I "ant to mention one additional di&lomatic challenge "e>re focused on6 ho" to manage resources that cross
national 4oundaries# ;oundaries are not al"ays clearly delineated, es&ecially at sea# If oil or gas is discovered in an area t"o
countries share or "here 4oundaries are ineact, ho" "ill they develo& itU Earlier this year, after a long negotiation led 4y the State
De&artment, the United States and Meico reached a ground4rea%ing agreement on oil and gas
resources in the Fulf of Meico, and "e "ill 4e sending it to Congress for action soon# *he
agreement clearly lays out ho" the United States and Meico "ill manage the resources that
transcend our maritime 4oundary # No", in addition to these eam&les of energy di&lomacy, "e>re also focused
on our second area of engagement6 energy transformation O hel&ing to &romote ne" energy solutions,
including rene"a4les and energy efficiency, to meet rising demand, diversify the glo4al energy su&&ly, and
address climate change# *he transformation to cleaner energy is central to reducing the "orld>s car4on emissions and it is
the core of a strong 7'st century glo4al economy# ;ut "e %no" very "ell that energy transformation cannot 4e accom&lished 4y
governments alone# In the net 7/ years, the "orld is going to need u& to V'/ trillion in investment to generate and transmit
electricity# Fovernments can and "ill &rovide some of it, 4ut most "ill come from the &rivate sector# No", that>s not only a
huge challenge, 4ut a huge o&&ortunity# And I "ant to ma%e sure that American com&anies and American "or%ers are
com&eting for those %inds of &roAects# After all, American com&anies are leaders across the field of energy O leaders
in rene"a4les, high?tech, smart?grid energy infrastructure, 4ioenergy, energy efficiency# And in the
coming decades, American com&anies should have the chance to do much more 4usiness "orld"ide, and 4y doing so, they "ill
hel& to create American Ao4s# No", governments can do several things to &romote energy transformation, li%e educate our
citi@ens a4out the value of energy efficiency and clean technology# ;ut &erha&s the most im&ortant thing "e can do is enact &olicies
that create an ena4ling environment that attracts investment and &aves the "ay for large?scale infrastructure#
%ranian 5roliferation is a uni!uely bad instance of proliferation 3 causes /5T
collapse and terrorist ac!uisition of nu"es
Hantor, 12, ''0107D'D -Moshe, President of the International Buem4ourg Corum on Preventing Nuclear Catastro&he, 2*he
!orld !ith A Nuclear Iran5, *he !all Street .ournal,
htt&600online#"sA#com0article0S;'DDD'J7JD/7(JH(DJ'J''DJ/(//HH77D8DD8R8/8J#html, MM9
<nly days ago, Iran 4egan loading uranium fuel rods into the core of its first nuclear &o"er &lant at ;ushehr# !hile many
in the international community &layed do"n the significance of ;ushehr, it is em4lematic of an illegal nuclear &olicy
that could s&ell the end of the Nuclear Non?Proliferation *reaty -NP*9E&erha&s the most im&ortant
&illar of glo4al security# An %ranian bomb must be stopped not only for w$at it
could p$ysically wrea" on its neig$bors and t$e world at large, but for t$e
paradigm#brea"ing order t$at could result if %ran is able to ac$ieve nuclear
weaponi:ation ' Many neigh4oring governments have already said that they "ill fast?trac% their
o"n nascent nuclear programs toward weapons capability if Iran ac=uires the 4om4#
*his domino effect could spread furt$er around t$e globe , thus tearing the NP* to
shreds# Nuclear "ea&ons "ould 4ecome so common&lace that any of the more t$an 122
current conflicts around t$e world could come to a devastating conclusion
wit$ t$e flic" of a switc$' *he nations soon to ac=uire nuclear "ea&ons "ill not 4e decent democracies# As
recent history has sho"n, itIs countries li%e North Korea, SaddamIs Ira=, Iran, and Bi4ya that have attem&ted to 4uild the
atom 4om4# )e&ressive regimes are see%ing to &rovide the im&etus for a ne" glo4al regime "here radicals, terrorists and
serial human?rights a4users "ill hold the 4alance of &o"er# *he greater the num4er of nuclear &o"ers, the
more li%ely t$at terrorist organi:ations will be able to ac!uire atomic weapons '
*he &ossi4ility of Wdirty 4om4sW e&loding in a maAor metro&olitan area "ould 4ecome more real# Al 3aeda and other
Islamic etremists ma%e no secret that they hold such intentions# *he e&losion of Aust one Wdirty 4om4W in a maAor city
"ould have devastating effects, "hich "ould 4e measured not Aust in human casualties 4ut in the long?term health of the
"orldIs economies and &olitical institutions# Such an act "ould turn inha4itants of the !estern "orld into fearful
hostages of terrorists, resulting in the moral and &sychological colla&se of our civili@ation#
)ac c$ina
nergy .iplomacy is "ey to solving +$inese energy aggression 3 prevents &'('
+$ina conflict t$roug$ cooperation
Rumley 12 - Dr Dennis )umley O CDI associate ? a%a 2 Dr# Dud )um4les5 is an $onorary Senior )esearch Cello" at the
University of !estern Australia, ? Australia and the Ne" Feo&olitics of Energy *hursday, '7 August 7D'D ?
htt&600"""#futuredirections#org#au0&u4lications0energy?security07H?australia?and?the?ne"?geo&olitics?of?energy#html ?;)!9
Energy di&lomacy on the &art of the "orld>s most energy im&ort?de&endent country, the United States, has ta%en four
&rinci&al directions in the ne" international energy order # Cirst, the United States has 4een
aggressively com&eting for energy su&&lies , es&ecially 2hemis&herically5 in the energy?niche states of
Canada, Mexico and Xene@uela# Second, the United States has used various means of dissuasion to"ards states entering its
N&erceived s&here of energy influence># Any 2intrusion5 into the 2American Ba%e5, therefore, 4y an Asian energy com&etitor,
es&ecially in the form of a 4ilateral agreement, is condemned and o&&osed# *hus, the United States &laced considera4le &ressure
u&on .a&an "hen it o&ted to develo& the A@adegan oil field in Iran# Curthermore, India>s agreement "ith Iran to 4uild a gas &i&eline
through ;aluchistan -the so?called 2&eace &i&eline59 "as &erceived as a Nchallenge to American authority> in the region and thus,
according to Klare, elicited N!ashington>s hysterical reaction># *hird, US di&lomacy to"ards energy?niche
economies and those of its allies involving a variety of inter?state agreements is encouraged# <n the other hand, regional
grou&ings, or N&roto?4locs>, as Klare refers to them, such as the Shanghai Co?o&eration <rgani@ation -SC<9, "hich com&rises China,
)ussia and Central Asian states, are condemned 4ecause of their Ndecidedly anti?American character> and their increasing
involvement in energy security# Curthermore, the United States "ould li%ely o&&ose the construction of any other ne" 4ilateral or
regional energy arrangement that "ould involve any other maAor Asian energy im&ort?de&endent state, such as India# <n the
contrary, sole US 2o"nershi&5 of such 4ilateral agreements is much &referred and is realised 4y
sufficient economic and &olitical &ressure on energy?niche economies and energy im&ort?
de&endent states# Courth, the geo&olitical strategy of the United States in the ne" international energy
order essentially comes do"n to one of t"o contrasting scenarios directed towards its most feared energy threat,
+$ina # *he first is a future ho&e that &( energy diplomacy wit$ +$ina will move from a
context of competition to one of collaboration' *he second and more immediate scenario involves an
encirclement strategy designed to contain China# In contrast to the SC<, Klare argues that there eists a nascent grou&ing "ith an
Nanti?Chinese cast> centred on the United States and .a&an, 4ut "hich also includes Australia, South Korea and others# $e notes,
ho"ever, that6 NAustralia, India, Indonesia and Xietnam have not committed to Aoining the United States and .a&an in an e&licitly
anti?Chinese alliance># Crom an Australian &ers&ective, there is clearly no significant desire to 4e involved in a
2containment of China5 energy &olicy # Indeed, in a 7DDH survey, R7 &er cent of Australians 4elieved that China>s
gro"th "as good for their country, "hile the sam&le "as almost evenly divided on "hether Australia should Aoin "ith other
countries to limit China>s influence# *his is &artly 4ecause Australia is no" in the midst of its 2regional5 international trading
&hase, "ith China 4eing its largest trading &artner, and 4ecause Australia, as an energy?niche economy, "ill aim to e&loit this
advantage "ith all energy im&ort?de&endent states, including China#
&(#+$ina relations are comparatively t$e most important for solving every
existential t$reat
+o$en and 7reenberg E -!illiam S# Cohen is chairman and CE< of *he Cohen Frou&, a strategic 4usiness consulting
firm 4ased in !ashington, D#C# Secretary Cohen served as U#S# secretary of defense, Maurice )# Freen4erg is chairman and CE< of
C#X# Starr _ Co#, Inc# Mr# Freen4erg retired four years ago as chairman and CE< of American International Frou& -AIF9 after more
than JD years of leadershi&, creating the largest insurance com&any in history, 2Smart Po"er in U#S#?China )elations,5 &g online c
htt&600csis#org0files0media0csis0&u4s0D8D1D8TmcgiffertTuschinasmart&o"erT"e4#&df 00ef9
*he evolution of (ino#&'(' relations over the net months, years, and decades has t$e potential
to $ave a greater impact on global security and prosperity t$an any ot$er
bilateral or multilateral arrangement # In this sense, many analysts consider the US#?China di&lomatic
relationshi& to 4e the most influential in the "orld# !ithout =uestion, strong and sta4le U#S# alliances
&rovide the foundation for the &rotection and &romotion of U#S# and glo4al interests# :et
"ithin that 4road frame"or%, the traAectory of &'('#+$ina relations will determine t$e
success , or failure, of efforts to address t$e toug$est global c$allengesA global
financial stability, energy security and climate c$ange, nonproliferation, and
terrorism, among ot$er pressing issues # She&herding that traAectory in the most
constructive direction &ossi4le must therefore 4e a &riority for !ashington and ;eiAing#
Xirtually no ma;or global c$allenge can be met wit$out &'('#+$ina
cooperation ' *he uncertainty of that future traAectory and the Wstrategic mistrustW 4et"een leaders in !ashington
and ;eiAing necessarily concerns many e&erts and &olicyma%ers in 4oth countries# Although some U#S# analysts see China
as a strategic com&etitorEdeli4erately vying "ith the United States for energy resources, military su&eriority, and
international &olitical influence ali%eE analysis 4y the Center for Strategic and International Studies -CSIS9 has generally
found that China uses its soft &o"er to &ursue its o"n, largely economic, international agenda &rimarily to achieve its
domestic o4Aectives of economic gro"th and social sta4ility#' Although ;eiAing certainly has an eye on !ashington, not all of
its actions are underta%en as a counter&oint to the United States# In addition, CSIS research suggests that gro"ing Chinese
soft &o"er in develo&ing countries may have influenced recent U#S# decisions to engage more actively and reinvest in soft?
&o"er tools that have atro&hied during the &ast decade# *o the etent that there eists a com&etition 4et"een the United
States and China, therefore, it may 4e mo4ili@ing 4oth countries to strengthen their a4ility to solve glo4al &ro4lems# *o 4e
sure, U#S# and Chinese &olicy decisions to"ard the res&ective other &o"er "ill 4e
determined in large &art 4y the choices that leaders ma%e a4out their o"n nations
interests at home and overseas, "hich in turn are sha&ed 4y their res&ective domestic contets# ;oth &arties
must recogni@eEand acce&tEthat the other "ill &ursue a foreign &olicy a&&roach that is in its o"n national interest# :et,
in a glo4ali@ed "orld, c$allenges are increasingly transnational , and so too must
be t$eir solutions' As demonstrated by the ra&id s&read of SA)S from China in 7DD1, &andemic
flu can 4e s&read ra&idly through air and via international travel# Dust &articulates from Asia settle in Ba%e *ahoe# An
economic downturn in one country can and does trigger an economic
slowdown in anot$er ' T$ese c$allenges can no longer be addressed by eit$er
containment or isolation' W$at constitutes t$e national interest today
necessarily encompasses a broader and more complex set of considerations
t$an it did in t$e past As a general &rinci&le, the United States see%s to &romote its national interest "hile it
simultaneously &ursues "hat the CSIS Commission on Smart Po"er called in its Novem4er 7DD( re&ort the Wglo4al good#W1
*his a&&roach is not al"ays &ractical or achieva4le, of course# ;ut neither is it &ure 4enevolence# Instead, a strategic
&ursuit of the glo4al good accrues concrete 4enefits for the United States -and others9 in
the form of 4uilding confidence, legitimacy, and &olitical influence in %ey countries and
regions around the "orld in "ays that ena4le the United States to 4etter confront glo4al and transnational
challenges# In short, the glo4al good com&rises those things that all &eo&le and governments "ant 4ut have traditionally not
4een a4le to attain in the a4sence of U#S# leadershi&# Des&ite historical, cultural, and &olitical differences 4et"een the United
States and China, ;eiAingIs ne"found a4ility, o"ing to its recent economic successes, to contri4ute to the glo4al good is a
matter for common ground 4et"een the t"o countries# *oday there is increasing recognition that no ma!or global
challenge can be addressed effectively" much less resolved" without the active
engagement of#and cooperation between#the U nited S tates and China #
)ac scs
nergy diplomacy solves (out$ +$ina (ea conflict
+linton 1) former Secretary of State -$illary )odham Clinton, 2 Energy Di&lomacy in the 7'st Century5 <cto4er 'H, 7D'7,
htt&600"""#state#gov0secretary0rm07D'70'D0'8811D#htm9 00K:
Bet me s&ea% Aust 4riefly a4out the three &illars of our glo4al energy strategy# Cirst, regarding the geo&olitics of
energy, "e>re focused on energy di&lomacy# No" some of our energy di&lomacy is related to issues in the
headlines# :ou may have read a4out heated dis&utes over territorial claims in the South China Sea# !ell,
"hy do you thin% that>s ha&&eningU *here are &otentially significant =uantities of oil and gas resources
right net door to countries "ith fast?gro"ing energy needs# And you can see "hy at times the situation
is 4ecoming =uite tense# !e are su&&orting efforts 4y the &arties themselves to ado&t a clear
code of conduct to manage those &otential resources "ithout conflict#
(out$ +$ina (ea conflict also goes nuclear
Wesley 61) PMichael !esley, Non?)esident Senior Cello" at the ;roo%ings Institution and an AdAunct Professor at Friffith
University and *he University of Sydney, former Eecutive Director of the Bo"y Institute for International Policy, former Professor
of International )elations and Director of the Friffith Asia Institute at Friffith University, and Senior Becturer in International
)elations at the University of Ne" South !ales, .uly 7D'7, 2!hat>s at sta%e in the South China SeaU5
htt&600lo"yinstitute#cachefly#net0files0"esleyT"hatsTatTsta%eTsna&shot''#&dfQ
*he South China Sea is enclosed 4y the "est coast of mainland Southeast Asia, ;orneo and the Phili&&ine archi&elago# )ich
in hydrocar4ons and fish stoc%s, it is traversed 4y over one?third of glo4al shi&&ing# Its "aters and
sea4ed are su4Aect to si o&&osing territorial claims O 4y China, *ai"an, Xietnam, Malaysia, ;runei
and the Phili&&ines O 4ut these confrontations are generally not regarded as seriously as the *ai"an Straits and the Korean
&eninsula standoffs# ;ut the South China Sea is more un&redicta4le, and certainly "arrants much closer
and more sustained attention 4y strategists and &olicy?ma%ers# It is in the South China Sea that the
com&onents of Asia>s changing &o"er dynamics are most concentrated and on dis&lay6 China>s
gro"ing strategic heft and &aranoid sense of entitlementG its Southeast Asian neigh4ours> ho&es and
misgivings a4out China>s regional dominanceG and the United States> com&ulsion to meet China>s strategic
challenge# *he South China Sea is a tangle of com&eting and mutually com&licating claims over
territory, resources and navigation rights# Feo&olitically, it is li%e the ;ermuda triangle, reversing e&ected
alignments and sus&ending normal rules of the game# It &its Asia>s t"o most significant Communist countries, China and Xietnam,
against each other, unites usually 4itter enemies China and *ai"an, and is dra"ing the United States 4ac% to a &artnershi& "ith
Xietnam a generation after the fall of Saigon# *he South China Sea is the flash&oint in the Pacific "here
conflict is most li%ely to 4rea% out through miscalculation # It is a cro"ded maritime
environment contested 4y some ine&erienced maritime forces "ith underdevelo&ed naval
doctrine, among "hom there are no esta4lished and acce&ted rules for managing maritime
incidents# And the com4ination of the claimant states> &o"er asymmetries, overla&&ing &rerogatives,
and gro"ing nationalism mean that incidents, once they occur, are li%ely to escalate# *here are four reasons
"hy finding solutions to the South China Sea dis&utes should 4e given the highest &riority 4y strategic &olicy?ma%ers# '# Cor China
it>s a4out security O and res&ect *he South China Sea sym4olises ;eiAing>s larger maritime dilemma# *he
country>s maAor &o&ulation and &roductive centres cluster along China>s coastline, and are therefore vulnera4le to maAor attac% from
the sea# Naval strategists see China as hemmed in along its sea coast 4y a chain of states or territories hostile to ;eiAing6 .a&an,
Korea, the )yu%u Islands, *ai"an, and the Phili&&ines# *he overriding goal of Chinese naval strategy is to
esta4lish dominance over the "aters "ithin this Nfirst island chain># At the southern end of the first island
chain, the South China Sea is crucial to China>s commercial shi&&ing, energy flo"s, and the access of its
$ainan island?4ased su4marines to the Pacific# ;ut the South China Sea>s southern and "estern access &oints
O the Sunda, Bom4o%, Bu@on and Malacca Straits O are controlled 4y allies or &artners of the United States#
*he 4est "ay to offset this vulnera4ility is to control the South China Sea itself O and there4y
loosen the American &osition in Southeast Asia# Influential elites in China vie" the South China Sea as N4lue
territory> O that is, as much a &art of China>s sovereign territory as *i4et, LinAiang or *ai"an# *o this line of thin%ing, any surrender
of its claims in the South China Sea "ould signal a "ea%ening of its rights to *i4et, LinAiang or *ai"an O and is therefore
unthin%a4le# China>s '887 *erritorial Ba" classified the South China Sea as China>s internal "aters, meaning foreign naval vessels
and aircraft must first gain ;eiAing>s &ermission 4efore transiting, su4marines must surface, and that China retains the right to evict
other countries> shi&&ing at any time# ;eiAing>s "illingness to enforce this la" has 4een gro"ing a&ace "ith its naval &o"er in the
"estern Pacific# In recent "ee%s, ;eiAing has &laced the S&ratly and Paracel Islands and the Macclesfield ;an% under &refectural?
level administration, esta4lished a J/?mem4er legislature to administer the ''DD &eo&le "ho live on the islands, and a&&roved the
de&loyment of a Peo&le>s Bi4eration Army garrison to the islands# 7# Southeast Asia O avoiding the 4ad old days If
unaddressed, the dynamics in the South China Sea could return Southeast Asia to the 4ad old
days of inter?state divisions , domestic insta4ility and com&etitive great?&o"er interventions # <n
no other issue have the disagreements and rivalries 4et"een ASEAN mem4er states 4een so
sustained and o4vious# *he Phili&&ines and Xietnam demand that the organisation su&&orts them in standing u& to ;eiAing# <n
the other side are Cam4odia, Baos and Myanmar, "ith no direct sta%e in the conflict and "hich refuse to endorse the Phili&&ines>
and Xietnam>s confrontational stance# Indonesia, Malaysia and Singa&ore are concerned a4out the dis&ute, 4ut 4elieve that avoiding
confrontation "ith China "ill im&rove the &ros&ects for &roductive negotiations# *he stand?off over the South China
Sea e&oses the hollo"ness of Asian institutions> reliance on the &rinci&le of unanimity O "hich means
that any mem4er>s o4Aection can %ee& an issue, no matter ho" &ressing, off the agenda# ;eiAing>s refusal to discuss the South China
Sea in any regional meeting, and its im&licit threat to "ithdra" from any organisation that doesn>t res&ect this "ish, sho"s
Southeast Asia>s confidence that it could Nsocialise> China 4y "elcoming it into regional institutions "as mis&laced# Asian institutions
allo" ;eiAing to ma%e a&&arent concessions, such as its 7DD7 agreement "ith ASEAN to a Declaration of Conduct on the South
China Sea, "ithout actually surrendering any &art of its &osition# As China and the United States increase the sta%es in the South
China Sea, ASEAN>s cardinal &rinci&le of neutrality is threatened# *he Phili&&ines, Xietnam, Malaysia,
Singa&ore and Indonesia are tightening their strategic relationshi&s "ith the United States, Aust as Cam4odia, Baos and *hailand
dee&en their lin%s to China# And there are signs that the dis&utes have 4ecome entangled in domestic &olitics in the Phili&&ines and
Xietnam, ma%ing their stances even more uncom&romising# In Manila, follo"ing allegations that ;eiAing used corru&t &ayments to
soften the former Arroyo administration>s stance on the South China Sea, the current A=uino administration and its Parliamentary
o&&osition are vying for the most uncom&romising &olicies on the issue# *o counter rumours circulating around $anoi that ;eiAing
has N4ought> the Xietnam>s senior leadershi&, the Xietnamese government has &assed a la" claiming sovereignty over the S&ratly and
Paracel Islands# 1# Cor the United States it>s a4out Credi4ility O "ithin limits It is in the South China Sea that Southeast Asia>s
anieties a4out China overla& "ith American anieties a4out ;eiAing>s naval 4uildu&# <ver the &ast t"o years, the United States has
ta%en an active interest and &osition in "hat had formerly 4een a dis&ute 4et"een China and the other claimants# *his means there
are no" in effect t"o layers to this dis&ute6 a 4asic stand?off 4et"een the territorial claimantsG and an overarching strategic contest
4et"een ;eiAing and !ashington# Cor the United States, "hat>s at sta%e in the South China Sea is the
via4ility of its entire &resence in the "estern Pacific# *he US Navy>s access to the South China
Sea is contested 4y ;eiAing# China claims it "ill res&ect the freedom of &assage of shi&s and aircraft through the area, on
the condition that they are en route to another destination, and do not conduct military eercises or collect intelligence or militarily
useful data# !ashington is adamant that the South China Sea>s sea lanes are international "aters, and
are therefore su4Aect to freedom of navigation, "hich in international la" allo"s the conduct of military eercises
and the collection of intelligence and militarily useful data# If !ashington surrenders its a4ility to navigate the
South China Sea on its o"n terms, it "ill lose a maAor foothold in the "estern Pacific# *he South
China Sea in effect &its a Chinese e&ansive claim -sovereignty 4ased on historical usage9 against an American e&ansive claim, that
freedom of navigation allo"s the collection of intelligence and military data# *he American claim is contested in other "aters 4y
Malaysia, Indonesia and India, though su&&orted 4y other regional countries# China accuses the US of Nhy&ing> the freedom of
navigation =uestion, arguing that it hides an intention to use the issue to 4uild a coalition against China# Cor the Southeast Asian
states contesting China>s South China Sea claims, the United States> &resence and interest in the issue is a &rere=uisite for their
&osition# !ashington is acutely a"are that it needs to 4e seen as a relia4le ally and &artner in the Pacific#
It realises that its arms?length res&onse to the Asian Cinancial Crisis eroded its &osition in Asia and set China on its &ath to"ards
4uilding soft &o"er in the region# Cor Southeast Asians "orried that !ashington>s attention or "ill to stay in the region may erode,
there is virtue in %ee&ing the South China Sea on the agenda# ;ut !ashington can>t give its allies and &artners a
4lan% che=ue "hich allo"s them to confront, and even &rovo%e, China from the comfort of the assum&tion that
the United States "ill 4ac% them u&# And some in Southeast Asia are "atching !ashington>s moves very
closely, sensitive that any concession could signal its acce&tance of China>s claims in the South
China Sea# J# Solutions are Part of the Pro4lem Either multilateral mediation or international la" is most
often used to resolve dis&utes of this sort O 4ut in the South China Sea they act to eacer4ate the
situation# ;eiAing refuses to discuss the dis&ute in any multilateral contet, fearing that it "ill facilitate
the formation of a front against China# *he Southeast Asian claimants, ho"ever, are adamant that they must
deal "ith China as a coalition, "ith Manila &articularly insistent that ASEAN must negotiate a common &osition 4efore
negotiating "ith China# *he result is a stand?off6 the Phili&&ines insists that ASEAN must find a common &osition 4efore
negotiating "ith China, "hile China "ill only negotiate if ASEAN a4andons the search for a common &osition# International
la" also intensifies the dis&ute# *he United Nations Convention on the Ba" of the Sea does not recognise
China>s historical claims, and therefore cannot serve as the 4asis for an adAudication of the dis&ute# !orse, 4ecause
international la" relies on un4ro%en longevity of claims as the 4asis for adAudication, none of
the &arties to the South China Sea dis&ute can allo" others> claims to &ass uncontested, in case
this is ta%en as evidence of its relin=uishing of its claim# *he result is a steady drum 4eat of
hydrocar4on &ros&ecting, fishing, the occu&ation of islets, and maritime clashes# Policy Im&lications *here is a
great deal at sta%e in the South China Sea# *he dynamics of this issue "ill im&act on China>s evolving international
&ersonality, the res&onse of its neigh4ours to its rising &o"er, and the longevity of the United States> &osition in the "estern Pacific#
!ith the gro"th of trade and investment around Asia>s IndoPacific coast, the South China Sea "ill 4ecome ever more cro"ded "ith
shi&&ing and commerce#
)ac arctic
Arctic conflict is coming now and goes nuclear
(taples, E
PSteven, )ideau Institute Danish Institute for International Studies, Co&enhagen , 2P)ESEN*A*I<N N<*ES S*EPS *<!A)D AN A)C*IC NUCBEA)
!EAP<N C)EE ^<NE5, Dans% Institut for Internationale Studier, H0'D, htt&600"""#diis#d%0gra&hics0Events07DD80Presentation[7DSta&les#&dfQ
*he fact is, the Arctic is 4ecoming an @one of increased military com&etition# )ussian President
Medvedev has announced the creation of a s&ecial military force to defend Arctic claims# )ussian Feneral Xladimir Shamanov
declared that )ussian troo&s "ould ste& u& training for Arctic com4at, and that )ussia>s
su4marine fleet "ould increase its 2o&erational radius#5 *his "ee%, t"o )ussian attac% su4marines
"ere s&otted off the U#S# east coast for the first time in '/ years# R In .anuary, on the eve of <4ama>s
inauguration, President ;ush issued a National Security Presidential Directive on Arctic )egional
Policy# As Michael $amel?Freene has &ointed out, it affirmed as a &riority to &reserve U#S# military vessel and aircraft mo4ility
and transit throughout the Arctic, including the North"est Passage, and foresa" greater ca&a4ilities to &rotect U#S# 4orders in the
Arctic# *he ;ush administration>s disastrous eight years in office, &articularly its decision to "ithdra" from the A;M treaty and
de&loy missile defence interce&tors and a radar in Eastern Euro&e, has greatly contri4uted to the insta4ility "e are seeing today# *he
Arctic has figured in this rene"ed interest in Cold !ar "ea&ons systems, &articularly the u&grading of the *hule ;allistic Missile
Early !arning System radar for 4allistic missile defence# *he Canadian government, as "ell, has &ut for"ard
ne" military ca&a4ilities to &rotect Canadian sovereignty claims in the Arctic, including
&ro&osed ice?ca&a4le shi&s, a northern military training 4ase and a dee& "ater &ort# Denmar% last "ee%
released an all?&arty defence &osition &a&er that suggests the country should create a dedicated
Arctic military contingent that dra"s on army, navy and air force assets "ith shi&?4ased helico&ters a4le to dro& troo&s
any"here# Danish fighter &lanes could 4e &atrolling Freenlandic airs&ace# Bast year, Nor"ay chose to 4uy JH Boc%heed C?1/ fighter
Aets, &artly 4ecause of their suita4ility for Arctic &atrols# In March, that country held a maAor Arctic military &ractice involving (,DDD
soldiers from '1 countries in "hich a fictional country called Northland sei@ed offshore oil rigs# *he manoeuvres &rom&ted a &rotest
from )ussia O "hich o4Aected again in .une after S"eden held its largest northern military eercise since the end of the Second
!orld !ar# A4out '7,DDD troo&s, /D aircraft and several "arshi&s "ere involved# .ayantha Dhana&ala, President of Pug"ash and
former UN Under?Secretary for Disarmament Affairs, summari@es the situation 4luntly# $e "arns us that 2Crom those in the
international &eace and security sector, dee& concerns are 4eing e&ressed over the fact that t"o nuclear
"ea&on states O the United States and the )ussian Cederation, "hich together o"n 8/ &er cent
of the nuclear "ea&ons in the "orld O converge on the Arctic and have com&eting claims# *hese
claims, together "ith those of other allied NA*< countries O Canada, Denmar%, Iceland, and
Nor"ay O could, if unresolved, lead to conflict escalating into the threat or use of nuclear
"ea&ons#5
nergy diplomacy resolves Arctic conflicts
+linton 1) former Secretary of State -$illary )odham Clinton, 2 Energy Di&lomacy in the 7'st Century5 <cto4er 'H, 7D'7,
htt&600"""#state#gov0secretary0rm07D'70'D0'8811D#htm9 00K:
No" some of our energy di&lomacy is focused on remote areas li%e the Arctic, a frontier of une&lored
oil and gas de&osits, and a &otential environmental catastro&he# *he melting iceca&s are
o&ening ne" drilling o&&ortunities as "ell as ne" maritime routes, so it>s critical that "e no" act
to set rules of the road to avoid conflict over those resources, and &rotect the Arctic>s fragile ecosystem#
!e>re "or%ing to strengthen the Arctic Council, "hich includes all eight Arctic nations, including the United
States, so it can &romote effective coo&eration# Bast summer I "ent u& to *romso, a4ove the Arctic Circle, in Nor"ay, to "here the
ne" Secretariat of the Arctic Council "ill 4e 4ased, in order to discuss these issues, "hich four years ago didn>t have much
currency, 4ut today are 4eing seen as increasingly im&ortant#
)ac russian monopoli:ation
nergy diplomacy solves Russian monopoli:ationGt$at t$reatens urasian
security
+linton 1) former Secretary of State -$illary )odham Clinton, 2 Energy Di&lomacy in the 7'st Century5 <cto4er 'H, 7D'7,
htt&600"""#state#gov0secretary0rm07D'70'D0'8811D#htm9 00K:
Another focus of our energy di&lomacy is hel&ing to &romote com&etition and &revent mono&olies#
Consider "hat>s 4een ha&&ening in Euro&e# Cor decades, many Euro&ean nations received much of
their natural gas via &i&eline from one country6 )ussia# Ce" other sources "ere availa4le# ;ut that has no"
changed in &art 4ecause of the increased &roduction here in the United States, there>s a lot more natural gas in the glo4al mar%et
loo%ing for a home# Plus, there>s natural gas in the Cas&ian and in Central Asia# *hey>d li%e to sell it,
and Euro&e "ould li%e to 4uy it# ;ut first, they need to 4uild &i&elines# And that>s the goal of a
&roAect called the Southern Corridor, "hich "ould stretch across the Euro&ean continent# *he United States has
4een an active &artner to all those &artici&ants to hel& move this &roAect to fruition# No" "hy have
"e done thisU !ell, "e "ant to see countries gro" and have stronger economies, 4ut also 4ecause
energy mono&olies create ris%s# Any"here in the "orld, "hen one nation is overly de&endent on
another for its energy, that can Aeo&ardi@e its &olitical and economic inde&endence# It can ma%e a
country vulnera4le to threats and coercion# And that>s "hy NA*< has identified energy security as a %ey security issue of our time#
It>s also "hy "e created the U#S#?Euro&ean Union Energy Council to dee&en our coo&eration on strategic energy issues# It>s not Aust a
matter of economic com&etition, as im&ortant as that is# It>s also a matter of national and international security#
T$at +auses urasian instability
Asmus, 1 ? Eecutive Director of the *ransatlantic Center at the Ferman Marshall Cund of the United States, in ;russels, Crom
'88( to 7DDD, he served as U#S# De&uty Assistant Secretary of State for Euro&ean Affairs -)onald, 2 Euro&eIs Eastern PromiseG
)ethin%ing NA*< and EU Enlargement,5 Coreign Affairs# Ne" :or%6 .an0Ce4 7DDH#
htt&600"""#Astor#org#&roy#li4#umich#edu0sta4le0&df&lus07DD7D7(D#&dfUacce&t*CZtrue9
IN *$E early '88DS, after the Iron Curtain lifted, !estern leaders sei@ed a historic o&&ortunity to o&en the doors of NA*< and the
Euro&eanUnion -EU9to &ost communist central and eastern Euro&e# ;y consolidating democracy and ensuring
sta4ility from the ;altics to the ;lac% Sea, they redre" the ma& of Euro&e# As a result, the continent
today is more &eaceful, democratic, and free# *his accom&lishment "as the result of a common
U#S#?Euro&ean grand strategy that "as controversial and fiercely de4ated at the time# *he goal "as
to 4uild a &ost?Cold !ar Euro&e W"hole, free, and at &eaceWG to rene" the transatlantic allianceG and to re&osition the United States
and Euro&e to address ne" glo4al challenges# ;ut as successful as the strategy of enlargement has 4een, the
"orld has changed dramatically since it "as forged# *he United States and Euro&e face ne" ris%s
and o&&ortunities on Euro&eIs &eri&hery and need to recast their strategic thin%ing accordingly
for a ne" era# Current &olicy to"ard Euro&eIs &eri&hery is increasingly out of date, for three reasons# Cirst, the !est has
changed# *he 80'' attac%s &ulled U#S# attention and resources a"ay from Euro&e and to"ard the Middle East# *he reservoir of
transatlantic good"ill and &olitical ca&ital accumulated during the '88DS has eva&orated in the sands of )<NABD D# As MU s is
Eecutive Director of the *ransatlantic Center at the Ferman Marshall Cund of the United States, in ;russels# Crom '88( to 7DDD,
he served as U#S# De&uty Assistant Secretary of State for Euro&ean Affairs# P8/Q
)onald D# Asmus Ira=# In Euro&e, enlargement fatigue has set in than%s to stum4ling institutional
reforms and the mounting e&ense of integrating ne" EU mem4ers# It "as "idely assumed that the
"estern ;al%an states -Al4ania and the former :ugoslav re&u4lics9 "ould all eventuallyA oin the EU and NA*<, 4ut even that can no
longer 4e ta%en for granted# *ur%eyIs chances of gaining EU mem4ershi& are fading# Indeed, t$e window of
opportunity to expand t$e democratic world t$at opened wit$ t$e end of t$e +old
War is now at ris" of closing' Second, the East has changed# *he challenge of the '88DS "as to
consolidate democracy in central and eastern Euro&e along a north south ais from the ;altics
to the ;lac% Sea# *odayIs even more difficult challenge is to sta4ili@e the countries of Eurasia, the
region "here Euro&e and Asia meet, along a ne" ais etending east"ard from the ;al%ans
across the ;lac% Sea region# *he !ests &olicy to the southern Caucasus and including *ur%ey,
to"ard Euro&e, U%raine, Feorgia, Armenia, and A@er4aiAan to"ard Euro&eIs Sand"iched
4et"een an unsta4le Middle &eri&hery cannot East to the south and a hostile )ussia to the north,
these countries are the ne" flan% of remain on cruise the Euro?Atlantic community# <ld may still "or% in the ;al%ans,
4ut countries have changed such as Feorgia and U%raine?let alone Moldova and ;elarus, if and "hen the latter
o&ens u& to the outside "orld?are "ea%er, &oorer, and more &olitically &ro4lematic than the
central and eastern Euro&ean countries NA*< and the EU sought to integrate earlier# *heir claim to
4e &art of Euro&e is more tenuous, and the &erceived !estern im&erative to hel& is less o4vious# *he &olicy tools develo&ed for
central and eastern Euro&e a decade ago are, accordingly, no longer as effective# Cinally, )ussia has changed# In the '88DS, it
"as a "ea%, =uasi democratic state that "anted to 4ecome &art of the !est# No", a more &o"erful, nationalist, and less
democratic Russia is c$allenging t$e West# Mosco" sees itself as an inde&endent
Eurasian &o"er, offering its o"n authoritarian ca&italist model of develo&ment as an alternative
to democratic li4eralism# It &ractices a form of mercantilist geo &olitical hard4all that many in Euro&e thought "as gone for
good# No"here is this more clear than in its &olicies to"ard Euro&eIs P8RQ
Euro&es Eastern Promise &eri&hery, "here it is see%ing to halt or roll 4ac% democratic 4rea%throughs in &laces such as Feorgia and
U%raine# Mosco"Is "illingness to use its energy resources as a &olitical "ea&on has made
Euro&ean countries reluctant to confront )ussia over its antidemocratic 4ehavior# Until the EU
can li4erali@e its energy mar%ets and diversify its su&&lies, Mosco" "ill have the u&&er hand# In
this ne" strategic environment, !estern &olicy to"ard the nations on Euro&eIs &eri&hery cannot remain
on cruise control as if nothing has changed# NA*< and the EU need to articulate a ne" strategic
rationale for e&anding the democratic !est and devise a ne" a&&roach to dealing "ith )ussia#
*here is another o&&ortunity today to advance !estern values and security and redra" the ma&
of Euro&e and Eurasia once more# ;ut ne" ideas "ill 4e necessary to sei@e it?and to reinvent the transatlantic alliance in
the &rocess# <U* !I*$ *$E <BD *$E F)AND strategy of democratic enlargement that lay 4ehind the o&ening u& of NA*< and
the EU early in the '88DS gre" out of the t"in im&eratives of reuniting Euro&e follo"ing communismIs colla&se and reinventing the
transatlantic alliance for the &ost?Cold !ar era# T$e goal was to consolidate democracy across t$e
eastern $alf of t$e continent by anc$oring central and eastern uropean countries
to t$e West' It reflected the vision of a &eaceful Euro&e e&anding its foreign &olicy hori@ons
and sharing glo4al leadershi& and res&onsi4ility "ith the United States# At the time, !ashington
concluded that the EU alone "as too "ea% to lead the enlargement &rocess# *hus NA*< too% the lead in
4ringing central and eastern Euro&e into the fold# NA*<IS mem4ershi& could more easily 4e e&anded, and etending NA*<IS
security um4rella to countries in those regions "as critical to the consolidation of democracy# NA*< also contri4uted to reform 4y
raising its re=uirements for ne" mem4ers, a Wtough loveW &olicy designed to reinforce &ositive transformation# As NA*< &layed a
%ey role in ta%ing the security issue off the ta4le and o&ening its doors to the East, the EU assumed most of the 4urden of
transforming &ost?communist societies into li4eral democratic ones# E#U# enlargement &olicy "as an asymmetric negotiation#
Candidate countries sim&ly had to accede to the EUIS eisting acquiscommunautaire the full range of its la"s, regulations, and
institutions# *he ne"comers had little say in anything 4ut the timeline under "hich the EUIS
re=uirements "ould 4e im&lemented# Nevertheless, it "as this transformation that fundamentally
tied these countries to the !est and thus created enduring security on the continent# Freat care "as
ta%en to ensure that countries not included in the initial round of enlargement "ould not 4e desta4ili@ed# *he !est did not "ant to
re&eat the mista%e that U#S# Secretary of State DeaSn Acheson made in '8/D, "hen he a&&eared E&anding the reach to s%etch a ne"
!estern security &erimeter and there4y invited the conclusion that of NA*< and the EU countries on the other side of the line "ere
once again does not of no interest to the !est# *herefore, NA*< and EU Policy sought to 4lur the lines 4et"een mean starting a ne"
mem4ers, &otential future mem4ers, and Cold !ar &artners# In &ractice, this meant finding ne" "ays to em4race and dee&en
coo&eration "ith countries that did not see% mem4ershi& or "ere not yet realistic candidates for it# NA*< e&licitly left o&en the
&ossi4ility of further e&ansion do"n the road# *he EU "as more circums&ect, 4ut it, too, e&anded its outreach to countries on
Euro&eIs &eri&hery "hose future sta4ility and orientation it "anted to sha&e# *he !estIs desire to mitigate any negative fallout "as
&erha&s most visi4le in its handling of )ussia# In different yet reinforcing "ays, the Americans and the Euro&eans signaled their
strategic desire to &ull )ussia to"ard the !est in the ho&e that Mosco" "ould eventually evolve into a &artner and &erha&s even a
de facto ally# NA*< and EU enlargement "ere accom&anied 4y an un&aralleled effort to engage Mosco" and "or% for )ussiaIs o"n
democratic trans formation, "hile still ta%ing "hat "ere seen as its legitimate interests into account# *his strategy "as not a ne"
effort to contain )ussia 4ut an attem&t to integrate it?al4eit in a looser form and on a different timeline than that of its smaller
"estern neigh4ors# And it "as not merely rhetoric# NA*< rethought its military strategy and force &osture in order to underscore
that it had no offensive intentions# Moreover, it offered to e&and &olitical and military coo&eration and
&lan for future Aoint military o&erations "ith )ussia# *he EU set out its o"n far?reaching &lans
to dee&en coo&eration# *he !est too% such ste&s des&ite uncertainty over "here )ussia "as headed and des&ite the fear
that Mosco" "ould ta%e advantage of these o&enings to &araly@e !estern institutions rather than coo&erate "ith them# Boo%ing
4ac%, !estern &olicy achieved t"o of its goals?anchoring much of central and eastern Euro&e and &reventing insta4ility in those
countries remaining outside NA*< and the E u?and "as &artially successful in dealing "ith )ussia# *hese successes "ere
not inevita4le, and their im&ortance should not 4e underestimated# $ad NA*< and the EU not
acted, Euro&e today "ould 4e a messier, less sta4le, and more in"ard?loo%ing &lace# And
!ashington "ould have even fe"er allies in dealing "ith crises 4eyond Euro&e, such as
Afghanistan and Ira=# *oday, it is only too easy to forget that a decade ago there "ere concerns
that enlargement "ould create ne" and shar&er divisions 4et"een those countries Aoining NA*<
and the EU and those remaining on the outside# It has done the o&&osite# *he success of NA*< and EU
enlargement, and the inclusion of countries such as the ;altic states, set a &ositive &recedent for
the former Soviet re&u4lics# Collo"ing the )ose and <range )evolutions, democratic leaders in Feorgia and
U%raine 4ecame more serious a4out see%ing to tie their countries to the !est# After all, if the ;altic
states could do it, "hy should they not dare to do the sameU *he results in )ussia "ere mied, ho"ever# <n the one hand, the train
"rec% that "as so fre=uently &redicted 4y enlargement critics never ha&&ened# Ne" arrangements for coo&eration
"ith NA*< and the EU "ere set u&, and a 4rea%do"n of relations "ith Mosco" "as avoided# ;ut
the !estIs 4roader ho&es of esta4lishing dee&er relations "ith a more democratic )ussia never
materiali@ed# Instead of 4ecoming more democratic and coo&erative, Moscow $as become more
aut$oritarian and adversarial# $o&es that the !est and )ussia could find common strategic ground after
80'' have largely gone unfulfilled, and the t"o are even further a&art no" on issues such as Afghanistan,
Iran, and Kosovo# *he <range and )ose )evolutions "ere inter&reted in Mosco" not as democratic 4rea%throughs 4ut as
threatening develo&ments that needed to 4e challenged and reversed# !ho or "hat is res&onsi4le for these trends is, of course, an
issue of considera4le dis&ute# !as it a lac% of U#S# and Euro&ean imagination and "ill that allo"ed
)ussia to drift in this anti?!estern directionU <r "as it the result of internal )ussian dynamics over "hich the !est
had little, if any, influenceU Did NA*< and EU enlargement &ush )ussia in the "rong direction, or "as the !est fortunate to act
"hen it did given "hat has follo"edU Enlargement has created more democratic sta4ility on )ussiaIs "estern 4order than at any
time since Na&oleon# :et today, the KremlinIs s&in doctors are creating a ne" sta4?in?the?4ac% legend of ho" the !est 4etrayed
Mosco" during the '88Ds# *he ga& in historical narratives mirrors the increasingly tense relationshi& 4et"een the !est and )ussia#
ABB 3UIE* <N *$E EAS*E)N C)<N*U IN BIF$* of these ne" circumstances in )ussia, enlargement needs to 4e rethought from
the ground u&, starting "ith its strategic rationale# P'ooQ C<)EIFN ACCAI)S XolumeH(No#i
Euro&e>s Eastern Promise After the accession of a 4and of countries from the ;altic states in the north to ;ulgaria and )omania in
the south, many in the !est assumed that the enlargement &roAect "as almost com&lete, "ith the "estern ;al%ans constituting the
last &iece of unfinished 4usiness# *hey "ere sur&rised to suddenly find ne" countries from Eurasia, and
s&ecifically the "ider ;lac% Sea region, starting to %noc% on the doors of NA*< and the EU?and
unsure ho" to res&ond# In dealing "ith these ne" candidate countries, the !est must stic% to the values and
di&lomatic &rinci&les it laid do"n in the l88Ds, including the notion that countries are free to
choose their alliances# ;ut that alone is unli%ely to 4e enough, 4ecause although these countries clearly consider themselves
Euro&ean, many Euro&eans do not feel the same historical or moral commitment to them or see a com&elling strategic need to
integrate them# *hus, in addition to moral and &olitical arguments, the United States and Euro&e need to
articulate a strong strategic rationale for anchoring them to the !est# *hat argument is straight for"ard#
T$e c$allenge of securing uropeIs eastern border from t$e -altics to t$e -lac"
(ea $as been replaced by t$e need to extend peace and stability along t$e sout$ern
rim of t$e uro Atlantic community#from t$e -al"ans across t$e -lac" (ea and
furt$er into urasia , )ussia needs friends region that connects Euro&e, )ussia, and the
Middle East and involves core security and allies and the interests, including a critical energy
corridor# United States and !or%ing to consolidate democratic change and 4uild sta4ility in this area is as im&ortant Euro&e can
and for !estern security today as consolidating should 4e among them#
Democracy in central and eastern Euro&e "as in the '88Ds# %t is not only critical to expanding t$e
democratic peace in urope but also vital to repositioning t$e West vis#a#vis bot$
+entral Asia and t$e Middle ast# *his strategy &resents an o&&ortunity to redra" the strategic ma& of Euro&e
and Eurasia in a "ay that enhances the security of countries on Euro&eIs &eri&hery as "ell as that of the United States and Euro&e#
*he United States and Euro&e also need to rethin% "hat anchoring means in &ractice# In the '88Ds, it meant &ursuing mem4ershi&
in NA*< and the EU roughly in &arallel# No" the !est needs to 4e more flei4le and ta%e a long?term vie"# *he goal is to tie these
countries as closely to the !est as &olitics and interests on 4oth sides allo"# Cor some countries, this may mean eventual
mem4ershi& in 4oth NA*< and the EUG for others, it may mean mem4ershi& only in NA*<G and for the rest, it may mean
mem4ershi& in neither 4ut sim&ly much closer relations# Policy "ill have to 4e much more Wala carte than &ri fie# *he lin% 4et"een
NA*< mem4ershi& and EU mem4ershi& should 4e relaed, if not dro&&ed# *he EU has enough on its &late sustaining its
commitments to the "estern ;al%ans and *ur%eyG anything 4eyond that is &ro4a4ly a nonstarter for the time 4eing# NA*< "ill once
again have to ta%e the lead in anchoring countries such as Feorgia and others in the "ider ;lac% Sea region# *he !est must also
rethin% ho" it should engage and reach out to these countries# If mem4ershi& is less &lausi4le as a short?term o&tion, then the
=uality of ties short of mem4ershi& must 4e im&roved to com&ensate# <utreach must gro" in im&ortance and may increasingly
4ecome the center&iece of U#S# and Euro&ean strategy# At the moment, the fear of future enlargement is one factor actually holding
allies 4ac%, "ith institutions afraid of ta%ing even small ste&s do"n "hat some fear could 4e a sli&&ery slo&e# :et &recisely 4ecause
the countries in =uestion are "ea%er and more endangered, NA*< and the EU should actually 4e reaching out and engaging them
earlier# *hey need the security um4rella and engagement of the !est as much, if not more, than the countries of central and eastern
Euro&e did# *he "ay out of this dilemma is to consider mem4ershi& a long?term goal and focus in the meantime on strengthening
!estern outreach and engagement# *his means recasting &olicy tools to address the different needs of the countries that are less
develo&ed &olitically and economically# *ools such as NA*<IsW mem4ershi& action &lanW should 4e etended earlier and tied less
closely to actual mem4ershi& commitments, thus allo"ing these countries to 4enefit from guidance and engagement "hile
do"n&laying the =uestion of the end goal# At the same time, the EU needs to enhance its o"n tools, such as the Common Coreign
and Security Policy and the Euro&ean Neigh4orhood Policy, as "ell as reach out to these countries more directly 4y offering them
&olitical and economic su&&ort# !hen communism colla&sed, NA*< and the EU had little idea ho" to reach out to &ost?communist
countries P'D7Q
Euro&e>s Eastern Promise and anchor them to the !est# ;ureaucrats in 4oth institutions said it could not 4e done# ;ut &olitical "ill
and strategic imagination &revailed, and fresh a&&roaches "ere develo&ed# Political "ill can do the same today# As for )ussia,
neither !ashington nor ;russels "ants a confrontation "ith Mosco" at a time "hen they face daunting challenges 4eyond Euro&e#
;ut this does not mean the !est should a4andon its 4elief that the s&read of democracy along
)ussiaIs 4orders contri4utes to &eace and sta4ility Aust 4ecause the current authoritarian rulers
in Mosco" disagree# Nor should the !est a4andon its &rinci&les and succum4 to the s&here?of?influence thin%ing currently
emanating from Mosco"# If the United States and Euro&e still ho&e that democracy "ill eventually ta%e
root in )ussia, they must recogni@e that consolidating a &ro?!estern, democratic U%raine "ould
indirectly encourage democrati@ation in )ussia# <f course, antidemocratic forces in )ussia "ill
o&&ose such a move# After all, Mosco" only ac=uiesced in &revious rounds of NA*< and EU enlargement 4ecause it
concluded that the United States and Euro&e "ere determined to carry them out and that its efforts to o&&ose the !est "ould 4e
futile# !estern unity on issues such as the future of U%raine is therefore of the utmost im&ortance# Still, holding true to NA*<IS and
the EUIS core &rinci&les and e&anding these organi@ationsI reach does not mean starting a ne" Cold !ar# *he !est and Mosco"
should loo% for other areas in "hich their interests are more aligned, such as e&anding trade and investment or controlling nuclear
&roliferation and 4uilding a ne" arms control regime# *he %ey =uestion is "hether )ussia??"hen faced "ith a unified !est?"ill start
to loo% for common ground# As strong as )ussia may a&&ear at the moment, it remains a country "ith real long?
terms structural "ea%nesses and &ro4lems# It, too, needs friends and allies, and the United
States and Euro&e should 4e among them# UNCE)*AIN CU*U)ES *$)EE XE): different scenarios for the future
of !estern &olicy to"ard Euro&eIs &eri&hery reveal Aust ho" high the sta%es are in this region# In the 4est?case scenario, the United
States and Euro&e "ould regrou& under the net U#S# &resident and launch a ne" era of transatlantic o&eration 4y overcoming
differences on Ira=, avoiding disagreements over Iran, and sta4ili@ing Afghanistan# *his renaissance "ould include a
ne" and am4itious democratic?enlargement strategy, and the results "ould 4e significant#
Securing inde&endence for Kosovo "ithout turning Ser4ia against the !est "ould facilitate the
successful integration of the "estern ;al%ans into NA*< and the EU# In *ur%ey, the AKP?led government
"ould continue democratic reforms, 4ringing the country closer to EU accession# Feorgia and U%raine "ould continue to move
closer to the !est as "ell# *hat &ros&ect "ould hel& create &ositive &ressure for democratic change in A@er4aiAan and encourage
ArmeniaIs reorientation to"ard the !est# ;y 7D'7, a reunified West would $ave begun to build an arc
of democratic stability eastward into urasia and especially t$e wider -lac" (ea
region# )eali@ing that its real adversaries lie else"here, )ussia "ould eventually have no choice 4ut to reassess its &olicy and
see% a ne" ra&&rochement "ith the !est# A less o&timistic scenario is stagnation# In this case, the United States and Euro&e "ould
regain some &olitical momentum after 7DDH 4ut fail to achieve any significant democratic 4rea%throughs# A ne" U#S# administration
"ould manage to sta4ili@e and then etricate itself from Ira=, 4ut transatlantic tensions over Iran and other Middle Eastern issues
"ould &ersist# Kosovo "ould achieve inde&endence, 4ut in a manner that leaves Ser4ia alienated and una4le to find its "ay 4ac%
onto the &ath to"ard EU accession# In the "estern ;al%ans, only Croatia "ould remain on trac% for 4oth EU and NA*<
mem4ershi&# *ur%eyIs &ros&ects for Aoining the EU "ould fade, and reforms in Feorgia and U%raine "ould stall# A@er4aiAan "ould
remain an autocratic &ro?!estern ally increasingly vulnera4le to gro"ing radicali@ation from "ithin# ;y 7D'7, the !est "ould
have &atched u& relations across the Atlantic 4ut "ithout 4rea%throughs in the ;al%ans or
*ur%ey?let alone in U%raine or the "ider ;lac% Sea region# All of this "ould lead to a more
com&etitive relationshi& "ith )ussia, resulting in stalemate and a ne" chill in relations "ith
Mosco"# In the "orst?case scenario, rather than the !est consolidating ne" democratic
4rea%throughs, Russia would succeed in a strategy P'DJQ
Euro&eI Eastern Promise of roll4ac%# *he United States and Euro&e "ould not achieve a meaningful
ra&&rochement, and they "ould fail to consolidate democracy in the "estern ;al%ans# Kosovo
"ould 4ecome inde&endent, 4ut "ithout agreement from all sides# *his "ould launch Ser4ia on
a ne" nationalist traAectory, 4ringing further insta4ility to the region # U#S# failure in Ira= "ould
lead to &artition, estranging *ur%ey and &rom&ting An%ara to invade northern Ira= and further loosen
its ties to the !est# *his, in turn, "ould 4adly damage *ur%eyIs already strained relations "ith 4oth
!ashington and ;russels# U%raine "ould drift 4ac% to autocracy, and Feorgia, the one li4eral
democratic e&eriment in the ;lac% Sea region, "ould lose reform momentum and teeter to"ard
failure# Bast Novem4erIs declaration of a state of emergency in *4ilisi "as a reminder of ho" fragile and vulnera4le this
e&eriment is# Using its energy su&&lies and influence, )ussia "ould emerge as an authoritarian
ca&italist alternative to the !est, attracting autocratic leaders throughout Euro&e and Eurasia#
)ather than a renaissance of the transatlantic alliance, the result "ould 4e a retreat of democracy and a further s&lintering of the
democratic !est# As these scenarios ma%e clear, the "estern ;al%ans, Feorgia, U%raine, and the
"ider ;lac% Sea region are less sta4le and more at ris% today than central and eastern Euro&e
"ere a decade ago# And the sta%es are high# A "orld in "hich U%raine has successfully anchored itself to the !est "ould 4e
very different from one in "hich it has failed to do so# A "orld in "hich FeorgiaIs success has s&ar%ed democratic &rogress in the
region and hel&ed sta4ili@e the southern flan% of the Euro?Atlantic community "ould 4e a much safer one than a "orld in "hich
Feorgia has 4ecome an authoritarian state in )ussiaIs s&here of influence# And a world in w$ic$ t$e
democratic West is ascendant would be very different from one in w$ic$ an
autocratic, nationalist Russia is on t$e rise'
T$at results in /uclear War
Mcdermott 11 ? s&eciali@es in )ussian and Central Asian defense and security issues and is a Senior Cello" in Eurasian
Military Studies, *he .amesto"n Coundation, !ashington DC, Senior International )esearch Cello" for the Coreign Military
Studies <ffice -CMS<9, Cort Beaven"orth, Kansas, and Affiliated Senior Analyst, Danish Institute for International Studies,
Co&enhagen# McDermott is on the editorial 4oard of Central Asia and the Caucasus and the scientific 4oard of the .ournal of Po"er
Institutions in Post?Soviet Societies# $e recently "rote *he )eform of )ussia>s Conventional Armed Corces6 Pro4lems, Challenges
and Policy Im&lications -)oger, 2Feneral Ma%arov $ighlights the 2)is%5 of Nuclear Conflict5, '70R0'', *he .amesto"n Coundation,
htt&600"""#Aamesto"n#org0details0UtT4@dstaffdirectoryT&i'[/;sho"Uid[/DZ'JD_tT4@dstaffdirectoryT&i'[/;4ac%Pid
[/DZRD_noTcacheZ'9
In the current election season the )ussian media has s&eculated that the Defense Minister Anatoliy Serdyu%ov may 4e
re&laced, &ossi4ly 4y Dmitry )ogo@in, )ussia>s Am4assador to NA*<, "hich mas%s dee&er aniety a4out
the future direction of the Armed Corces# *he latest rumors also &artly reflect uncertainty surrounding ho" the
s"itch in the ruling tandem may reshuffle the &ac% in the various ministries, as "ell as concern a4out managing com&le &rocesses
in )ussian defense &lanning# <n Novem4er '(, )ussia>s Chief of the Feneral Staff, Army?Feneral Ni%olai Ma%arov,
offered "idely re&orted comments on the &otential for nuclear conflict eru&ting close to the
country>s 4orders# $is %ey o4servation "as controversial, 4ased on estimating that the &otential
for armed conflict along the entire )ussian &eri&hery $ad grown dramatically over the
&ast t"enty years -Profil, Decem4er 'G Mos%ovs%iy Komsomolets, Novem4er 7HG Interfa, Novem4er '(9#
During his s&eech to the Defense Ministry>s Pu4lic Council on the &rogress and challenges facing the effort to reform and moderni@e
)ussia>s conventional Armed Corces, Ma%arov lin%ed the &otential for local or regional conflict to escalate
into large?scale "arfare 2&ossi4ly even "ith nuclear weapons #5 Many )ussian commentators "ere
4e"ildered 4y this seemingly 2alarmist5 &ers&ective# $o"ever, they a&&ear to have misconstrued the
general>s intention, since he "as actually discussing conflict escalation -Interfa, I*A)?*ASS, Novem4er
'(G Mos%ovs%iy Komsomolets, Krasnaya ^ve@da, Novem4er 'H9#
Ma%arov>s remar%s, &articularly in relation to the &ossi4le use of nuclear "ea&ons in "ar, "ere
=uic%ly misinter&reted# *hree s&ecific as&ects of the contet in "hich )ussia>s most senior military officer
addressed the issue of a &otential ris% of nuclear conflict may serve to necessitate "ider dialogue
a4out the dangers of escalation# *here is little in his actual assertion a4out the role of nuclear "ea&ons in )ussian
security &olicy that "ould suggest Mosco" has revised thisG in fact, Ma%arov stated that this &olicy is outlined in
the 7D'D Military Doctrine, though he understanda4ly made no mention of its classified
addendum on nuclear issues -Kommersant, Novem4er 'H9#
)ussian media coverage "as largely dismissive of Ma%arov>s o4servations, focusing on the idea that he may have re&resented the
country as 4eing surrounded 4y enemies# According to Kommersant, claiming to have seen the materials used during his
&resentation, armed confrontation "ith the !est could occur &artly 4ased on the 2anti?)ussian
&olicy5 &ursued 4y the ;altic States and Feorgia, "hich may e=ually undermine Mosco">s future
relations "ith NA*<# Military conflict may erupt in +entral Asia, caused 4y insta4ility in
Afghanistan or Pa%istanG or "estern intervention against a nuclear Iran or North KoreaG energy com&etition in the Arctic or foreign
ins&ired 2color revolutions5 similar to the Ara4 S&ring and the creation of a Euro&ean ;allistic Missile Defense -;MD9 system that
could undermine )ussia>s strategic nuclear deterrence also featured in this assessment of the strategic environment -Kommersant,
Novem4er 'H9#
Since the reform of )ussia>s conventional Armed Corces 4egan in late 7DDH, Ma%arov has consistently &romoted
ado&ting net"or%?centric ca&a4ilities to facilitate the transformation of the military and develo&
modern a&&roaches to "arfare# Keen to dis&lace traditional )ussian a&&roaches to "arfare, and
harness military assets in a fully integrated net"or%, Ma%arov &ossi4ly more than any senior
)ussian officer a&&reciates that the means and methods of modern "arfare have changed and
are continuing to change -^avtra, Novem4er 71G Interfa, Novem4er '(9#
*he contours of this evolving and un&redicta4le strategic environment, "ith the distinctions 4et"een "ar and &eace often 4lurred,
interface &recisely in the general>s e&ression of concern a4out nuclear conflict6 highlighting the ris%
of escalation# $o"ever, such &otential escalation is lin%ed to the reduced time involved in other actors deciding to intervene in a
local crisis as "ell as the &resence of net"or%?centric a&&roaches among "estern militaries and 4eing develo&ed 4y China and
)ussia# Crom Mosco">s &ers&ective, NA*< 2out of area o&erations5 from Kosovo to Bi4ya 4lur the traditional red lines in escalationG
further com&licated if any &o"er "ishes to &ursue intervention in com&le cases such as Syria# Potential escalation
resulting from local conflict, follo"ing a series of un&redicta4le second and third order
conse=uences, ma%es Ma%arov>s comments seem more understanda4leG it is not so much a &ortrayal of
)ussia surrounded 4y 2enemies,5 as a recognition that, "ith "ea% conventional Armed Corces, in certain crises
Moscow may $ave few options at its disposal -Interfa, Novem4er '(9#
*here is also the added com&lication of a &ossi4ly messy aftermath of the US and NA*< dra"do"n from Afghanistan and
signs that the )ussian Feneral Staff ta%es Central Asian security much more seriously in this
regard# *he Feneral Staff cannot %no" "hether the threat environment in the region may suddenly change# Ma%arov %no"s
the rather limited conventional military &o"er )ussia currently &ossesses, "hich may com&el
early nuclear first use li%ely involving su4?strategic "ea&ons, in an effort to 2de?escalate5 an
escalating conflict close to )ussia>s 4orders# Mosco" no longer &rimarily fears a theoretical threat of facing
large armies on its "estern or eastern strategic aesG instead the information?era reality is that smaller?scale intervention
in areas vital to its strategic interests may 4ring the country face?to?face "ith a net"or%?centric
adversary ca&a4le of ra&idly e&loiting its conventional "ea%nesses# As )ussia &lays catch?u& in this
technological and revolutionary shift in modern "arfare ca&a4ilities, the age?old &ro4lem confronts the Feneral Staff6 the fastest to
act is the victor -See EDM, Decem4er '9# Conse=uently, Ma%arov once again critici@ed the domestic defense industry for offering the
military inferior =uality "ea&ons systems# :et, as s&eed and harnessing CJIS) -Command, Control, Communications, Com&uters,
Intelligence, Surveillance and )econnaissance9 4ecome increasingly decisive factors in modern "arfare, the ris%s for conflict
escalation demand careful attention O es&ecially "hen the dis&arate actors &ossess varied ca&a4ilities#
Unli%e other nuclear &o"ers, Russia $as to consider t$e proximity of several nuclear actors
close to its borders' In the coming decade and 4eyond, Mosco" may &ursue dialogue "ith other nuclear actors on the
nature of conflict escalation and de?escalation# $o"ever, "ith a multitude of varia4les at &lay ranging from ;MD, US
Flo4al Stri%e ca&a4ilities, uncertainty surrounding the 2reset5 and the emergence of an e&anded
nuclear clu4, and several &otential sources of insta4ility and conflict, any dialogue must consider
escalation in its "idest &ossi4le contet# Ma%arov>s message during his &resentation, as far as
the nuclear issue is concerned, "as therefore a muc$ toug$er bone than the old dogs of the
Cold !ar "ould "ish to c$ew on#
)ac la stab
nergy diplomacy is "ey to 4atin American regional (tability
-arbieri 11 -Energy Security6 *he Di&lomacy of South Korea in Batin America )ita ;ar4ieri O
&u4lished in 7D''htt&600"""#international#ucla#edu0media0files0)itaT;ar4ieriTS)F?h1?
J@o#&df?;)!9
Energy di&lomacy in this study is understood as the assurance of energy sources 4y 4uilding
&artnershi&s through echange &rograms, esta4lishment of research institutes, forums and di&lomatic meetings as a
&rere=uisite for KoreaNs economic develo&ment# Curthermore, the idea of energy security im&lies economic gro"th,
develo&ment, regional integration, national security or the use of oil "ealth to influence events
in other countries , leading to increase th e energy demand that induces diversification of su&&liers across
the "orld# As a result, the consum&tion of fossil fuels "ill increase and they "ill continue to &rovide the vast maAority
of energy although they are distri4uted unevenly around the "orld# ;e cause of this contet , deficit resources
countries li%e Korea com&elled to set strategic and &ragmatic &olicies in order to solve its energy security concerns# *hose
concerns are conditioned 4y the energy source su&&lies# *he "ay that those &olicies "ould 4e carried out "ill
determine "hether the country achieves the assurance of energy sources# *he eistent a&&roaches on the energy to&ic
have 4een related to develo&ment and energy security, as a source of conflict among nations,
rene"a4les, climate change, and environment# Cor eam&le Klare , Kalic%y / and Fold"in and :ergin R have focus
ed on the 4usiness of oil and gas and ho" governments are struggling geo&olitically in order to assure control over resources, and
this has to do "ith the gro"ing de&endence of rising &o"ers su ch as China and India # *his is directly related to the
changing geo&olitics of energy that may affect the glo4al and regional order, including relatio
nshi&s among the maAor &o"ers, sho"ing that the current energy field is 4ased on a di&lomatic and securit
y &ers&ective# According to :ergin, the rene"ed focus on energy security is driven in &art 4y an
eceeding tight oil mar%et and 4y high oil &rices, "h ich have do u4led over the &ast three years# I t is also fueled
4y several as&ects including geo&olitical rivalries and countries N fundamental need for energy to &o"er their economic gro"th# *he
scholar also noted that energy security "ill de&end much on ho" countries manage their relations "ith
one another, "hether 4ilaterally or "ithin multilateral frame"or%s# ( $ence, KoreaNs energy
di&lomacy in Batin America is allocated "ithin this contet # *he Bee Myng 4a% administration has made energy
security a &rimary national aim and it has also outlined ne" action &lans of energy di&lomacy# *he seriousness of this
energy di&lomacy "as tested "hen the government used &olitical &ersuasion to guarantee the
nuclear energy deal "ith the United Ara4 Emirates# During the tough negotiation &rocess, the Korean &resident &ersonally
su&ervised the &roAect , o4tained the di&lomatic su&&ort from the US and even travelled all the "ay to A4u Dha4i to attend the
signing ceremony of the deal he later called the d heaven sent national fortune# H *his eam&le the etent to "hich energy
has 4ecome im&ortant to the current government , and sho"s that di&lomacy is the main tool
used in order to get a successful outcome ' 4atin America strategic ally needs more
investments in order to accelerate t$e pace of economic moderni:ation and to
raise levels of domestic productivity# Cor <viedo, this has to do "ith de &rimari@ation goals for some Batin
American countries, &romoting industriali@ation and adding value to their &roducts # 8 Also it has to 4e noted that dealing "ith Batin
American countries, "hich some of them im&lement energy &olicies ruled 4y resource nationalism
strategies, could 4e more difficult than e&ected# *his is a challenge that the Korean g overnment and energy com&anies have to
&onder # In fact, other nations com&eting "ithin this region also confront this &ro4lem, such as China , "hich is 4uilding great
&artnershi&s "ith the energy a4undan t nations of ;ra@il and Xene@uela#
4atin American wars go global
Roc$in E= O Professor of Political Science
-.ames, Professor of Political Science at <%anagan University College, Discovering the Americas6 the evolution of Canadian foreign
&olicy to"ards Batin America, &&# '1D?'1'900;;
!hile there "ere economic motivations for Canadian &olicy in Central America, security considerations "ere &erha&s more
im&ortant# Canada &ossessed an interest in &romoting sta4ility in the face of a &otential decline of U#S# hegemony in the
Americas# 5erceptions of declining &'(' influence in t$e region O "hich had some credi4ility in
'8(8?'8HJ due to the "ildly ine=uita4le divisions of "ealth in some U#S# client states in Batin America, in addition to &olitical
re&ression, under?develo&ment, mounting eternal de4t, anti?American sentiment &roduced 4y decades of su4Augation to U#S#
strategic and economic interests, and so on O were lin"ed to t$e prospect of explosive events
occurring in t$e $emisp$ere# $ence, the +entral American imbroglio "as vie"ed as a fuse
"hich could ignite a cataclysmic process t$roug$out t$e region' Analysts at t$e
time worried t$at in a worst#case scenario, instability created by a regional war,
beginning in +entral America and spreading elsew$ere in 4atin America, mig$t
preoccupy Was$ington to t$e extent t$at t$e &nited (tates would be unable to
perform ade!uately its important $egemonic role in t$e international arena O a
concern e&ressed 4y the director of research for Canada>s Standing Committee )e&ort on Central America# It "as feared t$at
suc$ a predicament could generate increased global instability and per$aps even a
$egemonic war# *his is one of the motivations "hich led Canada to 4ecome involved in efforts at regional conflict
resolution, such as Contadora, as "ill 4e discussed in the net cha&ter#
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1ac u's' economy
Advantage JJ is t$e &'(' economyG
mployment low now
Appelbaum, 13 -;IN:AMIN APPEB;AUM, (0/0'1, 2Cor the Em&loyment )ate, an U&tic%5,
htt&600economi#4logs#nytimes#com07D'10D(0D/0for?the?em&loyment?rate?an?u&tic%0U
TrZD900EM
*he share of American adults "ith Ao4s rose slightly in .une, to /H#( &ercent# *hat matches the highest level since
the end of the recession in 7DD8, 4ut remains "ell 4elo" the &revailing level 4efore the recession# *he chart
sho"s the long?term trend6 a shar& dro&, a &rolonged stagnation and may4e, Aust may4e, the 4eginning of a recovery# *he
em&loyment rate has not moved much in recent years 4ecause Ao4 gro"th since the end of the recession
has 4asically %e&t &ace "ith &o&ulation gro"th# *he more familiar unem&loyment rate has declined
significantly, 4ut it counts &eo&le as unem&loyed only if they are loo%ing for "or%# It has declined 4ecause &eo&le
sto&&ed loo%ing, not 4ecause they started "or%ing# *hus the im&ortance of trac%ing the em&loyment rate#
Economists, including Cederal )eserve officials, say they e&ect that as the economy continues to gro", and the unem&loyment rate
continues to decline, discouraged "or%ers "ill start see%ing O and finding O "or% again# Until that ha&&ens, ho"ever, the
recovery is incom&lete#
T$e plan increases access to oil and natural gasGsolves t$e &'(' economy
*+/R, 13 -$ouse Committee on Natural )esources, J0'H0'1, 2;ill Introduced to A&&rove
*rans4oundary $ydrocar4on Agreement "ith Meico5,
htt&600naturalresources#house#gov0ne"s0documentsingle#as&UDocumentIDZ11DD1'900EM
*his 4ill "ould amend the <uter Continental Shelf Bands Act, and &rovide the legal certainty needed for
greater energy e&loration and develo&ment for resources that etend across our maritime
4order "ith Meico# *he Agreement "as signed in 7D'7 4y then?Secretary of State $illary Clinton and Meican Coreign
Minister Castellano at the F?7D summit in Bos Ca4os# It lifts the current moratorium on drilling along a section of the
4oundary, and &rovides a frame"or% for the safe management of trans4oundary hydrocar4ons along
the "hole maritime 4order# 2*his 4ill is another ste& to"ards em4racing an all?of?the?a4ove a&&roach to energy that safely develo&s
our natural resources to hel& achieve North American energy inde&endence# *his 4ill "ill hel& lo"er energy costs "hile
creating American Ao4s 4y safely o&ening u& more areas in the Fulf of Meico for e&loration
and &roduction# *his is a common sense a&&roach to "or% "ith our &artners south of the 4order to ma%e 4oth countries more
energy secure, "hile &rotecting our sovereignty# !e>re choosing to act instead of allo"ing the Administration to continue dragging
its feet on energy develo&ment,5 said )e&# .eff Duncan# 2Congressional a&&roval of this agreement "ill &rovide much?needed
certainty to U#S# energy com&anies that are interested in leasing and develo&ing these areas 4ut u& until no" have 4een una4le# It
"ill create ne" o&&ortunities for e&anded American energy &roduction and ena4le Ao4 creation and economic gro"th,5 said Natural
)esources Committee Chairman Doc $astings# 2A&&roval and im&lementation of this agreement is
un=uestiona4ly in the national interests of the U#S as a ste& to"ards energy security and Ao4 creation
in the United States, as "ell as much needed energy reform in Meico, and !estern $emis&here energy inde&endence# !e can
achieve energy inde&endence and 4etter energy coo&eration "ith our neigh4or and this is an im&ortant ste& in that direction,5 said
Coreign Affairs Su4committee on !estern $emis&here Chairman Matt Salmon -A^?D/9
xpanding permits for drilling in t$e 7ulf is critical to t$e sustainability of t$e &'('
economy
<uest, 11 -3uest <ffshore, .une 7D'', 2United States Fulf of Meico <il and Natural Fas
Industry Economic Im&act
Analysis5, htt&600"""#a&i#org0e0media0Ciles0Policy0.o4s03uestFoMEconomicAnalysis(?''?
7D''#&df900EM
*he &ositive economic im&acts of the offshore oil and natural gas industry investments0s&ending in
the Fulf of Meico are not restricted to the Fulf States or limited to the oil and natural gas industry# *hey are s&read
over a "ide geogra&hic area and ri&&le through many sectors of the economy , from oil and natural gas
machinery manufacturers to marine and air trans&ort services to food service &roviders servicing offshore o&erations and financial
com&anies that &rovide financial services and insurance to the industry# *he offshore Fulf of Meico oil and natural
gas industry is estimated to have s&ent VR#( 4illion in 7D'D outside the Fulf Coast states# *his
accounted for 1/ &ercent of annual investment0s&ending and su&&orted R/ thousand Ao4s in the
non?Fulf of Meico Coast States# *he 7D'D s&ending "as J &ercent lo"er than in 7DDH "ith em&loyment ( &ercent lo"er# In 7D'1,
3uest &roAects s&ending in the non?Fulf States due to the offshore Fulf of Meico activity to increase to V'D#H 4illion as o&erators
invest heavily to 4ring for"ard delayed &roAects# *his estimated 78 &ercent increase in s&ending from 7D'D is &roAected to s&ur an
e&ansion of non?Fulf State em&loyment to ''D thousand, a RR &ercent increase# !hile the industry remains
committed to develo&ing the natural resources located in the Fulf of Meico, they "ill only 4e a4le to do
so according to the s&eed "ith "hich offshore drilling &ermits are granted# 3uest>s &roAections of
domestic s&ending increasing 4y (' &ercent from 7D'D?7D'1, contri4utions to FDP increasing 4y (D &ercent, and em&loyment
increasing (( &ercent are all &redicated on the assum&tion of a return to historical rates of &ermitting# Fro"th of the
offshore Fulf of Meico oil and natural gas industry "ill 4e crucial for meeting U#S# energy needs
over the coming decades, and for s&urring Ao4 creation and economic gro"th # In light of the &otential of the
offshore oil and natural gas industry to create Ao4s, enhance U#S# energy security, and increase U#S# FDP, the return to normal
activity in the Fulf of Meico in a safe and environmentally res&onsi4le manner is of utmost im&ortance to the United States#
conomic collapse incentivi:es war and conflict 3 t$is inevitably goes nuclear
Royal, 12, director of Coo&erative *hreat )eduction at the U#S# De&artment of Defense, 7D'D -.edediah, Economics of !ar and
Peace6 Economic, Begal, and Political Pers&ectives, &g 7'1?7'/, ?;)!9
Bess intuitive is ho" &eriods of economic decline may increase the li%elihood of eternal conflict# Political science literature has
contri4uted a moderate degree of attention to the im&act of economic decline and the security and defense 4ehavior of
interde&endent states# )esearch in this vein has 4een considered at systemic, dyadic and national levels# Several nota4le
contri4utions follo"# Cirst, on the systemic level, Pollins -7DDH9 advances Models%i and *hom&son>s -'88R9 "or% on
leadershi& cycle theory, finding that rhythms in the global economy are associated wit$ t$e rise
and fall of a pre#eminent power and t$e often bloody transition from one pre#
eminent leader to t$e next# As such, eogenous shoc%s such as economic crises could usher in a
redistri4ution of relative &o"er -see also Fil&in, '8H'9 that leads to uncertainty a4out &o"er
4alances, increasing the risk of miscalc ulation -Cearon '88/9# Alternatively, even a relatively certain
redistri4ution of &o"er could lead to a permissive environment for conflicts as a
rising power may see" to c$allenge a declining power -!erner, '8889# Se&arately, Pollins -'88R9
also sho"s that glo4al economic cycles com4ined "ith &arallel leadershi& cycles im&act the li%elihood of conflict among maAor,
medium and small &o"ers, although he suggests that the causes and connections 4et"een glo4al economic conditions and
security conditions remains un%no"n# Second, on a dyadic level, Co&eland>s -'88R, 7DDD9 theory of trade e&ectations suggest
that 2future e&ectation of trade5 is a significant varia4le in understanding economic
conditions and security 4ehavior of states# $e argues that interde&endent states are li%ely to gain &acific 4enefits
from trade so long as they have an o&timistic vie" of future trade relations# $o"ever, if the e&ectations of future
trade decline, particularly for difficult to replace item suc$ as energy resources ,
t$e li"eli$ood for conflict increases, as states will be inclined to use force to gain
access to t$ose resources' Crises could potentially be the trigger for decreased trade
expectations either on its own or because it triggers protectionist moves by interdependent
states . *hird, ot$ers $ave considered t$e lin" between economic decline and
external armed conflict at a national level' -lomberg and *ess C)22)@ find a
strong correlation between internal conflict and external conflic t, &articularly during
&eriods of economic do"nturn# *hey "rite, *he lin%ages 4et"een internal and eternal conflict and &ros&erity are strong and
mutually reinforcing# Economic conflict tends to s&a"n internal conflict, "hich in turn returns the
favor# Moreover, the &resence of a recession tends to am&lify the etent to "hich
international and eternal conflicts self?reinforce each other# -;lom4erg and $ess, 7DD7, &# H89
Economic decline has also 4een lin%ed "ith an increase in t$e li"eli$ood of terrorism
C-lomberg, *ess and Weerapana, )22=@, w$ic$ $as t$e capacity to spill across
borders and lead to external tensions# Curthermore, crises generally reduce the
&o&ularity of a sitting government# 2Diversionary theory5 suggests that, w$en facing
unpopularity arising from economic decline , sitting governments $ave
increased incentives to fabricate external military conflicts to create a 8rally
around t$e flagD effect# !ang -'88R9, De)ouen -'88/9 and ;lom4erg, $ess and *hac%er -7DDR9 find su&&orting
evidence sho"ing that economic decline and use of force are at least indirectly correlated# Fel&i -'88(9, Miller -'8889, and
Kisangani and Pic%ering -7DD89 suggest that the tendency to"ards diversionary tactics are greater for
democratic states than autocratic states due to the fact the democratic leaders are generally
more susce&ti4le to 4eing removed from office due to lac% of domestic su&&ort# De De)ouen
-7DDD9 has &rovided evidence sho"ing that &eriods of "ea% economic &erformance in the United States and thus "ea%
Presidential &o&ularity are statically lin%ed to an increase in the use of force# In summary, recent economic scholarshi&
&ositively correlates economic integration "ith an increase in the fre=uency of economic crises, "hereas &olitical science
scholarshi& lin%s economic decline "ith eternal conflict at systemic, dyadic and national levels# *his im&lied connection
4et"een integration, crises and armed conflict has not featured &rominently in economic?security de4ate and deserves more
attention# *his o4servation is not contradictory to other &ers&ectives that lin% economic interde&endence "ith a decrease in the
li%elihood of eternal conflict, such as those mentioned in the first &aragra&h of this cha&ter# *hose studies tend to focus on
dyadic interde&endence instead of glo4al interde&endence and do not s&ecifically consider the occurrence of and conditions
created 4y economic crises# As such the vie" &resented here should 4e considered ancillary to those vie"s#
)ac economy iKl
%ncreasing offs$ore oil and natural gas in t$e gulf is "ey to t$e &'(' economy
<uest, 11 -3uest <ffshore, .une 7D'', 2United States Fulf of Meico <il and Natural Fas
Industry Economic Im&act
Analysis5, htt&600"""#a&i#org0e0media0Ciles0Policy0.o4s03uestFoMEconomicAnalysis(?''?
7D''#&df900EM
*he offshore oil and natural gas industry is instrumental to the United States 4oth from an energy
su&&ly &ers&ective and due to its contri4ution to U#S# FDP and Ao4 creation# In 7D'D, over 1D
&ercent of the oil and '' &ercent of the natural gas &roduced in the United States "as &roduced in
the Fulf of Meico -FoM9# *his &roduction is crucial to U#S# energy security# In addition, ca&ital investment and &urchases of
intermediate in&uts of the oil and natural gas industry stimulate its entire value chain and ri&&le
through many sectors of the economy, creating Ao4s, contri4uting to FDP and generating ta
revenue at all levels of government# <il and natural gas industry activity su&&orts em&loyment across a "ide
s"ath of industries in manufacturing and services, including oil and natural gas machinery, air and marine
trans&ort, legal and insurance services#
Key to economy, energy security, and coo&eration
(immons, 13 -Daniel Simmons, J01D0'1, 2U#S#?Meico *rans4oundary $ydrocar4ons
Agreement6 A )are Xictory for <il and Fas in the <4ama Era5,
htt&600"""#masterresource#org07D'10DJ0u?s?meico?trans4oundary?hydrocar4ons?
agreement0900EM
Conclusion *he energy and economic "elfare of the United States and Meico are intert"ined 4y our shared geogra&hy, geology, and
&eo&les# *he *rans4oundary $ydrocar4on Agreement "ill hel& to tie our countries together and
gro" our economies # North America does not lac% energy resources, 4ut "hat "e do lac%, at
times, is the necessary &olitical "ill that could lead to greater economic gro"th and &ros&erity# North
America is an energy rich continent# P'Q <ur energy issues are not issues of a lac% of su&&ly, 4ut a lac% of
access to energy resources# *he *rans4oundary $ydrocar4on Agreement is one "ay the federal government should 4e
moving for"ard to grant more access to ta&ayer?o"ned energy resources# *he agreement is a good agreement and should
e&editiously move for"ard, 4ut it should not have ta%en more than a year for the Administration to su4mit *rans4oundary
$ydrocar4on Agreement to Congress# Afforda4le, relia4le energy is critical for the "elfare of all Americans and Meicans#
$o&efully our countries "ill "or% 4etter together in the future to enhance our energy security and our
economic "elfare as "ell#
5M?
1ac pemex
Advantage JJ is 5M?G
5M? liberali:ation necessary
-oman, 13 -Karen ;oman, /07(0'1, 2!ill *he Promise of Meican Energy )eform ;e
)eali@edU5,
htt&600"""#rig@one#com0ne"s0oilTgas0a0'7RRR80!illT*heTPromiseTofTMeicanTEnergyT)e
formT;eT)eali@ed0UallZ$F7900EM
!ill *he Promise of Meican Energy )eform ;e )eali@edU MeicoIs current &residential administration see%s to
reform the nationIs oil and gas sector to encourage more &rivate foreign investment, 4ut Meico li%ely faces a
long road ahead in achieving meaningful energy reform# MeicoIs &revious government "as severely critici@ed
for not accom&lishing significant energy reform# *he much?antici&ated energy reform in 7DDH sought to strengthen cor&orate
governance in state energy mono&oly Petroleos Meicanos -PEMEL9 and &rovide technical oversight of PEMELIs u&stream
o&erations# WEnergy reform is considered the mother of all reforms, given that the sector is a huge driver for Ao4 creation and
economic gro"th,W said Dr# Duncan !ood, director of the Meico institute at the !oodro" !ilson International Center for Scholars,
at the Hth Annual Mayer ;ro"n Flo4al Energy Conference in $ouston# Meico is e&ected to again tac%le energy reform sometime
in August of this year# An overhaul of MeicoIs Constitution "ill 4e re=uired to allo" greater investment 4y
&rivate, foreign firms# *he additional investment and technologies "ill 4e needed to aid PEMEL in reaching its ultimate &roduction
goal# PEMEL is see%ing to 4oost its &roduction to over 1 million 4arrels of oil &er day -4o&d9, u& from its current &roduction rate of
7#/ million 4o&d, through e&loration, ultra?dee&"ater and integrated &roAects, ;arclays Ca&ital analyst .ames C# !est said in a May
77 research note# Due to a lac% of investment and ne" technologies, the num4er of ne" discoveries in Meico has declined, resulting
in decreases in &roduction and reserves, said !ood# PEMEL crude &roduction declined from Aust over 1 million 4o&d in 7DD( to an
estimated 7#/ million 4o&d in 7D'7# *his &roduction level is significantly lo"er than the 1#J million 4o&d that PEMEL &roduced in
7DD1?7DDJ# *he lo"er &roduction rate is 4ecoming a &ro4lem for the Meican government as demand for social &rograms and
government s&ending increases# Some fear that &roduction could decline further to 7 million 4o&d if reform is not im&lemented,
!ood noted# WPEMEL is not as disastrous a com&any as &eo&le thin%,W !ood commented# W*heyIre great at hunting ele&hants,
es&ecially "hen the ele&hant O Cantarell O "al%s out in front of them#W $o"ever, PEMEL and the Meican government ignored the
fact that the giant offshore oil field Cantarell, "hich "as discovered in '8(8, "ould eventually e&erience a &roduction decline, he
added# Instead of investing in ne" e&loration efforts and technology, the Meican government stri&&ed financial resources from
PEMEL to fund social and government s&ending &rograms, !ood said# *he re&lacement rate for reserves only recently hit the 'DD
&ercent mar% in the &ast year and a half, and some analysts have dis&uted "hether PEMEL is really fully re&lacing its reserves,
!ood noted# *he declines in &roduction sho" a clear need for investment in ne" e&loration and infrastructure, 4ut the =uestion
remains "hether PEMEL can tac%le these challenges alone# Des&ite having a4undant shale gas and associated
gas resources onshore and offshore, Meico is a net im&orter of natural gas# Meico im&orted
a&&roimately 7#' 4illion cu4ic feet &er day in 7D'7, u& 7' &ercent from 7D'', the U#S# Energy Information Administration -EIA9
re&orted May 'R# Natural gas flo"s from U#S# &i&elines accounted for HD &ercent of MeicoIs overall gas im&orts in 7D'7# Since
7DDR, li=uefied natural gas -BNF9 has met the remainder of MeicoIs im&orted gas needs, "ith most BNF im&orts to Meico coming
from Nigeria, 3atar and Peru, EIA re&orted# Des&ite increased im&orts, Meico has 4een e&eriencing gas shortages over the &ast '7
to 'H months# PEMEL has scaled 4ac% gas &roduction 4ecause MeicoIs gas &rice, "hich is lin%ed to the U#S# $enry $u4 &rice, has
declined# *his decision comes at a time "hen MeicoIs federal electricity utility CCE and PEMEL have increased gas consum&tion
for refining and electricity generation, and the &rivate sector "ants to increase its use of natural gas# *he shortage has created a
tense &olitical situation in Meico 4et"een the &rivate sector and the government as the &rivate sector lo44ies for access to more gas,
!ood noted# !ith a shortage of &i&elines to im&ort needed su&&lies from the United States, Meico is loo%ing to increase im&orts of
li=uefied natural gas -BNF9 to meet domestic demand, des&ite having to &ay significantly higher costs right no"# At least one cargo
delivered into Man@anillo "as &riced a4ove V7D0MM4tu# <ver the &ast year, some &rivate consumers are &aying significantly higher
costs, 4et"een V'R to V'H0MM4tu for BNF, a dramatic Aum& from &rices for regular gas that &u4lic customers are &aying#
W*hereIs a clear need for investment in the shale sector, a clear need for investment in
infrastructure of &i&elines,W !ood commented# *he =uestion remains "hether PEMEL can forge ahead "ith these
develo&ments alone# !hile the eastern &ortion of Meico is "ell?served 4y oil and gas &i&elines, the "estern &ortion of the country is
almost 4arren, !ood commented, meaning that customers in the region have little if no access to natural gas# *he &revious
&residential government of Celi&e Calderon &ro&osed a multi?year, VH 4illion &roAect to e&and the nationIs &i&eline net"or% and
add &i&eline ca&acity to 4ring more gas from the United States# !or% is under"ay on this infrastructure e&ansion, 4ut "ill ta%e
time, !ood noted# Small, agile com&anies are 4est suited to tac%le shale, 4ut PEMEL is a large oil
com&any that doesnIt do gas "ell# Cor this reason, energy reform discussions have focused on o&ening u& MeicoIs shale
sector for &rivate initiative, &articularly from U#S#?4ased com&anies "ith e&erience in U#S# shale &lays, said !ood# Meico Energy
)eform a $ot *o&ic <ver Past Decade Energy reform in Meico has 4een a hot to&ic for the &ast decade,
said Pa4lo Cerrante, a $ouston?4ased &artner "ith Mayer ;ro"nIs Cor&orate and Securities &ractices# *hat fact that the &olitical
&arty Institutional )evolutionary Party -P)I9, "hich "as res&onsi4le for nationali@ing MeicoIs oil and gas industry many years ago,
is finally endorsing energy reform ma%es it more li%ely that reform "ill occur#
,ailure to implement T-A causes 5M? liberali:ation efforts to fail
+,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E
*)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*?
''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM
Cirst, the *;A "ill, for the first time, allo" U#S#?listed I<Cs to "or% in &artnershi& "ith PEMEL , not
including service contracts# Many o4servers are o&timistic that the *;A is the meta&horical camelIs nose
under the tent, &aving the "ay to 4roader reform in Meico# *here is no guarantee of such an outcome, ho"ever,
failure for t$e &'(' to approve t$e T-A may put a drag on Meican domestic energy
reform momentum# *he *;A hel&s demonstrate that MeicoIs oil &atrimony can 4e &rotected in a
Aoint &roduction regime "ith U#S# com&anies# It "as suggested 4y some senior officials that &assage of the *;A
could hel& &rom&t 4roader domestic energy reform in Meico#
Additionally, t$e plan solves 5M? expertise
+,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E
*)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*?
''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM
!hy the *;A Matters *he center&iece of the *;A is the mandate to esta4lish so? called ]]uniti@ationII
agreements 4y "hich com&anies licensed 4y the United States and MeicoIs state oil com&any PEMEL
"ould Aointly develo& oil and gas reservoirs that have 4een discovered to etend across the maritime 4oundary# In effect, uniti@ation
agreements "ould "or% similarly to more "ell?%no"n &roduction sharing agreements -PSAs9, "here4y com&anies involved "ill
Aointly develo& a &roAect in order to s&read ris% given that dee& "ater develo&ments "ill cost 4illions of dollars each# Fiven PEMELIs
lac% of e&erience in dee& "ater, the most li%ely outcome is that I<Cs licensed 4y the United States "ould o&erate the develo&ments
and utili@e infrastructure 4ased on the United States side of the 4order, "hich is more etensive than that of Meico near to the area
of o&eration# $o"ever, the United States does have an interest in PEMEL gaining e&ertise in o&eration
in dee& "ater in order to im&rove the integrity of &otential PEMEL o&erated develo&ments
eclusively in Meican territory# A %ey difference 4et"een the uniti@ation agreements envisioned under the *;A and
traditional PSAs is that &hysical 4arrels &roduced "ill 4e allocated to the legal Aurisdictions of the United States and Meico,
&resuma4ly in &ro&ortion to the amount of reserves found on their res&ective sides of the 4order# *he Meican 4arrels, &resuma4ly,
"ill 4e &ro&erty of PEMEL as a state entity and the U#S# 4arrels "ill 4e treated under standard terms of U#S# licensing in the Fulf of
Meico# It is unli%ely that, from the U#S# &ers&ective, the *;A "ill meaningfully increase U#S# domestic oil &roduction in the near
term# *he maritime 4order area is dee& "ater and "ould re=uire massive investments# Such investments are &ossi4le and should 4e
encouraged 4y the U#S# government, ho"ever, it "ill ta%e years to get through regulatory hurdles and normal &roAect develo&ment
needs# $o"ever, the *;A "ould unloc% the maritime 4order region from moratoria, there4y offering long?term o&&ortunities to
increase U#S# domestic &roduction# *he *;A should 4e seen as a net &ositive to hel&ing reduce U#S# de&endence on im&orts from
trou4lesome regions and 4oosting domestic economic activity, and therefore the *;A should 4e vie"ed as a 4enefit for U#S# energy
security# ;enefits of &hysical 4arrels of oil &roduced are &otentially much greater in relative im&ortance on the Meican side of the
4order, "hich is e&eriencing decline in %ey fields, and that "ould 4e su4stantially 4eneficial to U#S# interests in Meican
economic gro"th# As discussed a4ove, Meico needs ne" oil &roduction# Develo&ing dee& offshore
&roduction "ould hel& diversify the Meican oil &ortfolio , &roviding economic 4enefit to the
Meican state "hether that oil is sold for e&ort mar%ets or used domestically# Moreover, having I<Cs "or%ing "ith PEMEL to
4oost domestic Meican &roduction "ill &rovide useful commercial o&&ortunities and, im&ortantly, 4oost confidence that
Meico "ill have significant oil availa4le to e&ort to the United States# As a relia4le, &roimate, and friendly
neigh4or, Meican oil im&orts su&&ort U#S# energy security#
5M? liberali:ation is "ey to /ieto6s agendaGeducation, telecommunications,
local debt
*ernande:, 13 -Maria .ose $ernande@, R07D0'1, 2Politics and <il6 MeicoIs )oad to )eform5,
htt&600eurasia#foreign&olicy#com0&osts07D'10DR07D0&oliticsTandToilTmeicosTroadTtoTrefor
m900EM
Is Meico finally on the verge of a historic reform &ushU E&ectations are on the rise, and for good reason# In office Aust over si
months, President Enri=ue PeMa Nieto has ta%en ste&s that suggest he is serious a4out &ushing through
&olicy changes meant to, among other things, im&rove the =uality of an education system that &roduces
students "ho score lo"er than their counter&arts in all other <ECD countries in reading, math, and science, and to o&en the
countryIs lucrative telecommunications sector, "hich could lo"er &rices for millions of Meican
consumers# *he government is also &ushing for a state and local fiscal res&onsi4ility la" intended to
&revent governors and local authorities from ta%ing on too much de4t# PeMa NietoIs financial reform
could also hel& &romote &u4lic access to credit# According to data from the !orld ;an%, credit as a &ercentage of FDP
remains at a4out 7R &ercent -in 7D''9, much lo"er than in Batin American &eers li%e ;ra@il -R' &ercent9 and Chile -(' &ercent9#
-ut t$e $ig$est $urdle, energy reform , has not yet 4een cleared# In the &ast decade, MeicoIs energy
sector has suffered from deteriorating o&erational, financial, and technological ca&a4ilities, shar&ly lo"ering &roduction for a vital
source of state revenue# Production has fallen from a record 1#J million 4arrels &er day in 7DDJ to a4out 7#/ million today# Caced
"ith rising &ensions and health?care 4ills, the governmentIs high de&endency on oil revenues -around 1D &ercent
of total revenues9 is 4ecoming increasingly "orrisome# Fiven the o&&ortunities it might create and its im&act on the
4roader economy, su4stantive reform of MeicoIs energy sector has also ca&tured the attention of foreign investors# In &articular,
Meico may have the "orldIs fourth?largest shale de&osits, eciting intense investor interest in o&&ortunities for &rivate
&artici&ation in 4oth offshore and shale &lays through &rofit?sharing agreements -&ossi4ly a variant of &roduction?sharing
agreements9# Energy reform "ould also offer PeMa Nieto an im&ortant &olitical victory , since he "ill
have succeeded "here so many of his &redecessors have failed# Past attem&ts have 4een defeated 4y a
&o&ulist commitment to nationali@ed energy that is "ritten into the Meican Constitution, limits on investments 4y state?o"ned oil
com&any Peme, the a4ility of state governments to gra4 a large share of the industryIs resources, PemeIs la4yrinthine 4ureaucracy,
assertive la4or unions, and &oliticians "ho "ere un"illing to acce&t the costs and ris%s that come "ith change#
ducation "ey to decrease drug cartel recruitingG"ey to t$eir overall operations
llingwood and Wil"inson, 12 -Ken Elling"ood and *racy !il%inson, '70'H0'D, 2Meican
drug cartels find youths to 4e easy &rey5, htt&600articles#latimes#com07D'D0dec0'H0"orld0la?fg?
meico?foot?soldiers?7D'D'7'8900EM
:ouths Idivert from their destinyI EdgarIs arrest "as one more shoc%ing t"ist in MeicoIs J?year?old drug "ar6 Could a 4oy "ho
stands 4arely chin high to a gro"n man 4e a 4loodthirsty cartel assassinU *he case has sha%en Meico, &ossi4ly 4ecause the ans"er
is so clear# Caced "ith an a4ysmal education system and even "orse Ao4 &ros&ects E and lured 4y easy drug
money and the clout that comes "ith it E thousands of ever?younger youths are Aoining the ran%s of
violent cartels# *he virtually endless su&&ly of young foot soldiers %ee&s the cartels "ell?stoc%ed
"ith thugs, gunmen, mules, &eddlers and loo%outs# As vulnera4le %ids fall through the crac%s, Meico ris%s
losing &art of a generation# W*hese %ids are victimi@ers, 4ut they are also victims,W said Miguel ;arrera, a former gangster
"ho no" "or%s to rescue violent teens from the streets# A4out a million youths are considered at ris% and easy &rey for cartels,
according to studies 4y the National Autonomous University of Meico in Meico City# It is a &recarious and &ro4a4ly short life# *he
young foot soldiers are little more than cannon fodder# As much as /[ of the more than 1D,DDD &eo&le %illed in the drug "ars in the
last four years "ere minors, according to civic grou&sG some "ere innocents caught u& in the violence, 4ut many "ere active
&artici&ants# Police and military officials say they are ca&turing a larger num4er of youths in o&erations against cartels# *"o sus&ects
in the August massacre of (7 Central and South American immigrants in northern Meico "ere '( and 'J# In Ce4ruary, officials in
the state of *a4asco announced the ca&ture of a '1?year?old girl "ho they said had 4een recruited 4y drug traffic%ers and trained to
%ill# *he &henomenon has crashed into a legal system un&re&ared for youths charged "ith grave offenses, s&urring a movement to
lo"er the age at "hich sus&ects can 4e tried and &unished as adults# In terms of &revention, ho"ever, there are only a fe"
&rograms aimed at sto&&ing cartel recruitment and little &olitical "ill to tac%le the &ro4lem#
Linsert impact from drugs fileM
%ndependently, 5M? failure crus$es t$e Mexican economy
(amples* and Bittor**, 1) *associate in the $ouston office of $ogan Bovells US BBP "ho
focuses on transactions in Batin American AND **&artner in the $ouston office of $ogan
Bovells US BBP "ho focuses on 4usiness la" in Batin America -*im ) Sam&les and .os, Buis
Xittor, R07'0'7, 2ENE)F: )EC<)M AND *$E CU*U)E <C MELIC<>S <IB INDUS*):6*$E
PEMEL ;IDDINF )<UNDS AND IN*EF)A*ED SE)XICE C<N*)AC*S5,
htt&600tAogel#org0"&?content0u&loads07D'70D(0Sam&les?CormattedTCinalT.une'1#&df900EM
+urrent declines in &roductivity "ill have maAor conse=uences for the Meican government#
Peme is Meico>s largest ta&ayer and has ty&ically accounted for 1D[OJD[ &ercent of federal
government revenues #7H As one of the three largest su&&liers of foreign oil to the United States, Meico>s declining
&roduction carries conse=uences north of the 4order as "ell#78 ;# Peme Is ;urdened 4y $eavy *a <4ligations to the Meican
Fovernment Peme does not &erform "ell in com&arison "ith &eer com&anies in economic
efficiency and other %ey indicators#1D *he most difficult issue facing Peme is its heavy ta 4urden#1' $istorically, this
ta 4urden routinely amounts to "ell over half of the com&any>s revenues#17 Peme recently recorded a =uarterly loss of H' 4illion
Meican &esosEone of its "orst =uarterly results in recent yearsE"ith ta &ayments re&resenting //[ of income#11 *hough recent
reforms have eased Peme>s ta 4urden slightly, distur4ing the status =uo remains &olitically daunting#1J Additionally, Peme
em&loys roughly 'JD,DDD &eo&le, a &ayroll "hich some have suggested is far too large#1/ Peme is under immense
&ressure to finance the Meican government , s&onsor social &rograms , and &rovide for Meico>s
energy needs Eall "hile remaining a maAor em&loyer of the Meican &eo&le# 1R In many "ays, Peme
has succeeded in accom&lishing these goals#1( $o"ever, the sustaina4ility of the current model has 4een 4rought into =uestion#1H
Peme is suffering the conse=uences of a &rolonged strategy focused on maimi@ing immediate
revenues for the government at the e&ense of research and develo&ment, ne" e&loration,
technical innovation, infrastructure s&ending, and ca&ital reinvestment#18 In other "ords, Peme has
4een focused on sustaining immediate &roduction rather than e&loration and future develo&ment# During the most 4ountiful years
of the su&ergiant Cantarell field, significant investments in e&loration and ne" develo&ment "ere not necessary to sustain high
levels of &roduction#JD $o"ever, shar& declines at Cantarell have e&osed "ea%nesses in the Peme 4usiness model#J' Peme is
ho44led 4y factors 4eyond its ta 4urden, such as high de4t and &ension lia4ilities, cum4ersome internal governance, com&licated
administrative and &olitical relationshi&s "ith the federal government, the Petroleum !or%ers Union of Meico -the Peme Union9,
and deficiencies in ca&ital and technology# )eversing the tide of declining &roduction "ill re=uire changes "ithin Peme as "ell as a
dee&er overhaul of the eisting regulatory frame"or% constraining Peme# C# +ontinued .eclines Will *ave
,ar#Reac$ing +onse!uences for Mexico As the most im&ortant com&any in Meico, a
source of national &ride, and a sym4ol of sovereignty, 5emex6s troubles are Mexico6s
troubles' *hough it is clear that declining &roduction must 4e reversed, =uestions remain as to ho" Meico "ill a&&roach its
&roduction conundrum# *he most immediate =uestion facing Peme is "hether eisting fields can 4e
effectively managed to etend &roduction and slo" decline through various recovery strategies#J7 In order to
4oost long?term &roduction, Meico "ill li%ely need to loo% to the Chiconte&ec ;asin and to dee&?sea reserves in
the Fulf of Meico#J1 All of the a4ove scenariosEand &articularly the long?term solutionsEre=uire advanced
technology and ca&ital investments 4eyond "hat Peme is currently ca&a4le of &roviding#JJ
(ustaining Mexican growt$ eliminates t$e incentive for immigration
+apobres, 1) -Kacy Ca&o4res, 707R0'7, 2Meico>s Strengthening Economy Could ;ode !ell
for Immigration )eform5, htt&600latino#fone"s#com0latino0money07D'10D707R0meicos?
strengthening?economy?could?4ode?"ell?for?immigration?reform0900EM
*han%s to an im&roving economy in their country, Meicans are staying home# A Fallu& &oll released
Monday said Aust 'J &ercent of Meicans say they "ould emigrate from the country, com&ared to 7' &ercent
in 7DD(# In an interesting t"ist, the current num4ers are almost identical to the '' &ercent of Americans "ho say they "ould
leave the U#S# if given the o&&ortunity# Since ta%ing office, MeicoIs ne" &resident, Enri=ue PeMa Nieto, has made it a &oint to stress
that his country W"ill "or% to im&rove the =uality of life and o&&ortunities in Meico so that migration is a &ersonal decision and not
a necessity#W Due to 4urgeoning economic o&&ortunities, the United StatesI largest immigrant grou& already has
fe" reasons to cross the 4order# As the United States continues to struggle to gain economic momentum follo"ing the
7DDH recession, the Meican unem&loyment rate has dro&&ed to Aust / &ercent# U#S# $is&anics still have one of the highest
unem&loyment rates in the country, at 8#H &ercent# Antonio Far@a, a former U#S #Am4assador to Meico, says the &oll 2is a sna&shot
of a trend that you have seen in the country over the last several years#5 2An e&anding middle class in Meico
means more &eo&le are "or%ing here,5 he said# Meico>s economic &erformance is closely lin%ed to the U#S#, "here it
sends almost HD &ercent of its e&orts# ;ut than%s to a s&i%e in the agriculture industry, Meico>s economy gre" 4y close to J &ercent
last year, com&ared to Aust 7 &ercent in the U#S# 2More Ao4s are 4eing created in Meico "hich means there is
less &ressure for &eo&le to emigrate,5 Manuel Sufre@?Mier, a Meican national and economist at American
University>s School of International Service, told Co Ne"s Batino# *he im&lications of these findings could affect
the recent &ush for com&rehensive immigration reform in the U#S# 2It>s good ne"s in the sense that it might hel& the U#S#
government to come u& "ith sensi4le immigration reform,5 Sufre@?Mier said# $e said 4oth sides can 4enefit from the economic
gro"th in Meico# 2It>s a good moment for the U#S#?Meico 4ilateral relationshi&,5 Sufre@?Mier said#
Linsert impact from /A%, affM
)ac atA cir turns immigration
+%R doesn6t solveGeconomy is t$e root cuase
0ng *ing, 11 Professor of Ba", University of San Crancisco -;ill <ng $ing, 707H0'', 2MeicoIs
Economy Is the Pro4lem *hat Anti?Immigrant Ba"s !onIt Solve5,
htt&600"""#huffington&ost#com04ill?ong?hing0meicos?economy?is?the?
&rT4TH781((#html900EM
Everyone agrees that "e need immigration reform# Cor years, Congress has attem&ted to stri%e a &rinci&led 4alance 4et"een greater
enforcement and a fair "ay to adAust the status for the 'D to '7 million undocumented immigrants in the country# $o"ever, even
immigrant rights advocates must ac%no"ledge that legali@ation "ill not solve undocumented migration &ermanently# An e&ansion
of visas "ill certainly hel&, 4ut if the &ac%age does not include at least the first ste&s to"ard hel&ing Meico im&rove its economy and
infrastructure, undocumented Meican migration "ill continue, and the tension over undocumented migration "ill resurface do"n
the road# *o truly understand undocumented migration, "e have to do "hat Americans have thus far 4een
un"illing to do6 Boo% 4eyond the sim&le e&lanation that migrants cross the 4order in search of
"or%# !e have to as% "hy they cannot find "hat they "ant in Meico# In '88J, "e "ere told that NAC*A
"ould solve the undocumented &ro4lem 4ecause ne" Ao4s "ould 4e created in Meico# ;ut NAC*A ultimately contri4uted to huge
Ao4 losses in Meico# Meican corn farmers could not com&ete "ith heavily?su4sidi@ed U#S# corn farmers, and no" Meico im&orts
most of its corn from the U#S# ;ecause of glo4ali@ation, 'DD,DDD Ao4s in MeicoIs domestic manufacturing sector "ere lost from '881
to 7DD1# !here do those unem&loyed "or%ers loo% for "or%U El Norte# An economic turnaround in Meico is
central to solving the undocumented migration challenge in the United States# Conservatives should understand that#
And li4erals should recogni@e that reducing undocumented migration is in MeicoIs interest as "ellG the &ersistent loss of a4le?
4odied "or%ers needed to 4uild its infrastructure and economy only hurts Meico# All of us understand that economic investment in
Meico "ill not and, &ro4a4ly, should not 4e done "ithout close monitoring#
)ac interaction
T*A provides t$e opportunity for cooperation wit$ 5emex
Martin and Wood 13 O *Director of the Energy Program at the Institute of the Americas at
the University of California, San DiegoG **Director of the Meico Institute at the !oodro"
!ilson International Center for Scholars, &rofessor for '( years in Meico and &reviously "as
director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de
M,ico -I*AM9 in Meico City -.eremy M# and Duncan, 2U#S# ShoUld Act 3Uic%ly on
trAnS4oUndAry hydrocAr4on Agreement !ith meico,5 !orld Politics )evie", May 1, 7D'1,
htt&600"""#iamericas#org0ne"s0!P)TUSTMeicoTD/D17D'1#&df900;"ang
*hird, then?Secretary of State $illary Clinton "as correct to em&hasi@e the commercial o&&ortunity and
energy security element of the accord "hen it "as first announced# *he agreement &rovides the
&ossi4ility for U#S# firms to Aoin "ith Meico>s national oil com&any, Peme, to e&loit dee&?
"ater oil resources in the Fulf of Meico along the countries> maritime 4oundaries# *his could
&rovide im&ortant o&&ortunities for U#S# com&anies, including eciting Aoint venture o&&ortunities "ith Peme
long thought im&ossi4le#
)ac expertise
T$e plan provides 5M? wit$ necessary expertise and tec$nology
Reuters, 1) -)euters, 707D0'7, 2Meico, US sign cross?4order oil deal for dee& "ater5,
htt&600"""#reuters#com0article07D'70D707D0meico?oil?us?idUSB7EHDKD:B7D'7D77D900EM
B<S CA;<S, Meico, Ce4 7D -)euters9 ? Meico and the United States signed an agreement on Monday to hel&
U#S# firms and Meican oil mono&oly Peme e&loit dee& "ater oil resources in the Fulf of Meico that
straddle the countriesI maritime 4oundaries# *he deal, negotiated last year, "ill lift the moratorium on oil e&loration and
&roduction in the "estern ga& &ortion of the Fulf and sets u& legal guidelines for com&anies to Aointly develo& any trans?4oundary
reservoirs# W*hese reservoirs could hold considera4le reserves ### 4ut they donIt necessarily sto& neatly at our
maritime 4oundary# *his could lead to dis&utes,W U#S# Secretary of State $illary Clinton said at a ministerial meeting of Frou& of 7D
nations in Bos Ca4os Meico# W*he agreement "e are signing today "ill hel& &revent such dis&utes#W Meico ? the "orldIs No# ( oil
&roducer ? is far 4ehind the United States in e&loring for dee& "ater oil reserves and has drilled less than 7D "ells in its territorial
"aters in the Fulf# Peme estimates there are more than 78 4illion 4arrels of crude e=uivalent in the area, or /H &ercent of the
countryIs &ros&ective resources# Carlos Morales, PemeIs director of e&loration and &roduction, told )euters in an intervie" on
Monday that the com&any &lans to drill si or seven ne" dee& "ater "ells this year and has a &lan for eight annually over the net
five years# So far most of the discoveries in MeicoIs dee& "aters have 4een natural gas# MeicoIs oil
industry regulator "orries Peme does not have the ca&a4ility or the safeguards in &lace to move
into ultra?dee& drilling# Safety concerns loom large after the e&losion on ;PIs Dee&"ater $ori@on rig in A&ril 7D'D that
%illed '' "or%ers and s&e"ed more than J million 4arrels of oil into the Fulf# Meico is ho&ing to attract hel& from &rivate
com&anies to e&lore for oil in the region "ith a 7DDH oil reform that allo"s for incentive 4ased o&erating contracts, 4ut no &roAects
have yet 4een announced W*his agreement also creates ne" o&&ortunities for our 4usinesses# American
energy com&anies "ill 4e a4le ? for the first time ? to colla4orate "ith Peme , their Meican
counter&art,W said Clinton# *he country, "hich relies on oil revenues to fund a third of the federal 4udget, closely guards its oil
resources nationali@ed since '81H# W*his agreement "as negotiated invaria4ly under the &rinci&le of res&ecting sovereign rights#
Meican oil "ealth is and "ill continue to 4e of the Meicans,W President Celi&e Calderon said at the event#
)ac economy add#on
Mexico is "ey to t$e &'(' economy
Roseman 1) O )esearch Associate at the Council on $emis&heric Affairs -Ethan,
2EN$ANCED )ECIP)<CI*: C<) *$E U#S#?MELIC< )EBA*I<NS$IPU5 Coha, '70'(0'7,
htt&600"""#coha#org0enhanced?reci&rocity?for?the?u?s?meico?relationshi&0900;"ang
*o com4at this &ending struggle, President PeMa Nieto 4egan his tenure 4y stating that he "ill 2launch a series of &olitical and
economic reforms5 ranging from social issues, such as education and social security, to reforms 4ased on im&roving energy
&roduction and national security# Meico is already the United States> third largest im&orter, and is
forecasted to 4e the largest one 4y 7D'H# In reality "ith these reforms, 2e&erts from the
financial industry, including Foldman Sachs and Nomura, &redict that, 4y 7D7D, Meico>s
economy "ill 4e among the ten largest in the "orld#5PJQ !ith such an economic &otential as a
result of effective trade agreements, Meico has the a4ility to not only advance the "elfare of its citi@ens, 4ut
to also 4e a &otential solution for the economic "oes of the United States# Curthermore, President PeMa
Nieto>s 4old and o&timistic reforms, com4ined "ith Meico>s &roAected economic gro"th, could &otentially act as the
vessel that transforms Meico out of the culture of violence that &ersists in the country today#
)ac oil add#on
PEMEL li4erali@ation solves high oil &rices
*argreaves, 1) -Steve $argreaves , H0'(0'7, 2MeicoIs 4ig oil &ro4lem5,
htt&600money#cnn#com07D'70DH0'(0ne"s0economy0meico?oil0inde#html900EM
Meico, one of the largest su&&liers of oil to the United States, has a 4ig &ro4lem6 Its &roduction of crude
is falling fast# In 7DDH, the countryIs &roduction &ea%ed at 1#7 million 4arrels a day, according to the U#S# Energy Information
Administration# Bast year, it didnIt even &roduce 1 million a day# *he reason6 aging oil fields and years of
underinvestment # Industry e&erts say Meico could revive &roduction if it allo"ed more investment
from international oil com&anies# ;ut under current &olicy, EIA says Meico "ill have to start im&orting oil 4y 7D7D#
Cor the United States, the decline in MeicoIs oil industry means it "ill li%ely 4e 4uying more oil from Canada and Saudi Ara4ia, the
No# ' and No# 7 sources of U#S# oil im&orts# Meico is no" third# And 4ecause oil is a glo4al mar%et, any drop in
production one place could mean $ig$er prices worldwide # *he loss of MeicoIs current e&orts
of a4out ' million 4arrels a day "ould 4e greater than the amount lost due to sanctions on Iran ?? al4eit over a longer time &eriod#
Many e&erts 4lame the structure of MeicoIs oil industry for the decline# Meico nationali@ed its
oil industry in '81H# Since then com&anies such as Eon Mo4il -L<M, Cortune /DD9, )oyal Dutch Shell
-)DSA9 and ;P -;P9 have 4een &rohi4ited from ta%ing a meaningful sta%e in the countryIs oil
o&erations# *he state oil giant, Petroleos Meicanos, or PEMEL, has run the sho"# PEMEL is one of the largest com&anies in the
"orld, and &rovides the Meican government "ith 17[ of its revenues, according to the EIA# ;ut oil e&loration re=uires
4ig investments and Meican la"ma%ers have long resisted giving the firm the money it needs to
go out and find ne" sources of crude# *he difference 4et"een U#S# and Meican oil e&loration is stri%ing, said .ose
Xalera, a &artner in the energy &ractice at the $ouston la" office of Mayer ;ro"n# *he num4er of "ells drilled in the U#S# Fulf of
Meico and the Eagle Cord shale in *eas is Whundreds to oneW "hen com&ared to the Meican side# Indeed, the United States has
4een undergoing a resurgence in oil &roduction, largely 4ecause of these t"o areas# W*here is a4solutely no geological reason to
4elieve the Eagle Cord ends at the 4order, or the Meicans got the dry side of the Fulf,W Xalera said# W*here is su4stantial &otential
that has not 4een develo&ed#W Meico has ta%en some small ste&s to li4erali@e its oil industry over the last fe" years, including
allo"ing foreign firms to 4id for contracts "ith PEMEL# A s&o%es"oman for PEMEL said these efforts, along "ith a recent dou4ling
of its 4udget, "ill ena4le the com&any to soon 4oost &roduction# ;ut industry analysts feel that unless international
com&anies are given o"nershi& sta%es in the oil fields, investment "ill remain lo" and
&roduction "ill continue to decline# *hereIs also 4een recent tal% of 4roader industry li4erali@ation, 4ut it faces strong
o&&osition from the countryIs unioni@ed oil "or%ers, government agencies that rely on PEMEL &roceeds and Meican consumers,
"ho 4enefit from gasoline su4sidies# Said AleAandra Be+n, an oil analyst at the consultancy I$S CE)A in Meico City6 <il is Wstill a
sensitive to&ic and &olitics &lay a critical role#W
)ac government funding
5M? liberali:ation "ey to sustain funding for development initiatives
7uilllermo, 13 -Fuillermo, MA# International Energy Master, Sciences Po Paris, (0'70'1,
2Partial li4erali@ation of PEMEL6 more efficient energy e&enditures and revenues5,
htt&600%ither#org0&olitics?governance0&artial?li4erali@ation?of?&eme?more?efficient?energy?
e&enditures?and?revenues900EM
!ith Meico>s main offshore fields declining, a &olitical consensus has emerged that the country>s most
&romising ne" frontiers ?the dee&"ater Fulf of Meico and shale resources? are too com&licated
and e&ensive for Peme to tac%le on its o"n# Moreover, des&ite Peme 4eing one of the "orld>s largest crude oil
e&orters, it im&orts 4ac% RD[ of its crude oil e&orts to the US once it is a refined &roductP7Q 4ecause of the lac% of refineries# And
4ecause Peme &rovides roughly one?third of the Meican government>s revenue, the oil
com&any>s decline has made it difficult for the state to &ursue other develo&ment &rioritiesP1Q#
Curthermore, since Peme must give a large &ortion of its revenues to the governmentER7[ in 7DDREit has generally had less cash
flo" availa4le to allocate to u&stream investments -Solache, 7DD(9# In general, National <il Com&anies -N<Cs9 ehi4it lo"er
la4or and ca&ital efficiencyPJQ, generate lo"er revenue, are less &rofita4le, and &roduce a
significantly lo"er annual &ercentage of their u&stream reserves than Private <"n Com&anies -P<Cs9
-*ordo, *racy, _ Arfaa, 7D''9# Such efficiency ga&s have 4een &artly Austified 4y the com&leity of o4Aectives &ursued 4y N<Cs
com&ared to the sim&le maimi@ation of shareholders> return on ca&ital &ursued 4y P<Cs# Pemeg value creation for Meicans is far
from trivial, ho"ever, the current mono&olistic structure has &roven to 4e not at its maimum &otential#
Manufacturing
1ac manufacturing
Mexican manufacturing slowing now
Reuters, 13 -)euters, (0'0'1, 2Meico .une manufacturing gro"th di&s to over 7?year lo"5,
htt&600"""#reuters#com0article07D'10D(0D'0meico?factories?
idUSE'NDDLDDS7D'1D(D'900EM
-)euters9 ? Meican manufacturing sector gro"th slo"ed in .une to a 7( month?lo" on "ea%ness in ne"
orders and out&ut, a survey sho"ed on Monday, suggesting Batin AmericaIs no# 7 economy remains sluggish# *he $S;C
Meico Manufacturing Purchasing ManagersI Inde -PMI9 fell to /'#1 in .une after adAusting for seasonal
variation, do"n from /'#( in May to the "ea%est &ace of e&ansion since data collection 4egan in A&ril 7D''#
*he reading a4ove /D, ho"ever, sho"ed continued gro"th# W*his confirms that the loss of steam in the manufacturing sector "ill
&revail in the second =uarter,W $S;C economist Sergio Martin said in a statement# $o"ever, Martin added that he e&ected gross
domestic &roduct -FDP9 gro"th to &ic% u& in the second half of the year# Cactory out&ut rose only slightly in .une, at its slo"est &ace
since data collection 4egan# *he rate of gro"th in ne" orders also eased to a ne" 7(?month lo", "hile ne" e&ort orders contracted
for the second month running to notch a survey lo"# Manufacturing e&orts e=uate to a4out 7/ &ercent of
MeicoIs FDP and the country had 4een shielded from a "ea% glo4al economy 4y continued U#S# demand for goods such as cars
and televisions# MeicoIs gro"th is seen slo"ing this year to around 1#' &ercent from 1#8 &ercent last year# *he PMI
inde, com&iled 4y Mar%it, is com&osed of five su4?indices trac%ing changes in ne" orders, out&ut, em&loyment, su&&liersI delivery
times and stoc%s of ra" materials and finished goods#
5M? liberali:ation is critical to increasing domestic natural gas productionG
solves Mexican manufacturing
+,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E
*)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*?
''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM
!hile oil &rovides vital government revenue, lac" of natural gas development t$reatens to stunt
Meican industry# It is re&orted that &arts of Meico could face natural gas shortages in the coming
year# Mean"hile, Meico sits on a sea of unconventional natural gas reserves# *he current natural gas situation??"hich several
interlocutors identified as a ]]crisisII??results from Meican natural gas 4eing &riced artificially lo" 4ecause it is lin%ed to the U#S#
&rice, "hich has fallen "ith the ra&id e&ansion of shale gas su&&lies# :et the im&act of U#S# su&&ly on Meican &rices eists des&ite
the limited &hysical integration of the t"o countriesI &hysical gas mar%ets# !hen com4ined "ith gas shortages in Meico, this
indicates the need 4oth for more &i&eline connections to the United States and for 4uilding out MeicoIs domestic gas infrastructure#
Doing so is made difficult, ho"ever, 4y confusion in the Meican mar%et "here the do"nstream natural gas sector has 4een
relatively li4erali@ed "hile the u&stream remains under the mono&oly control of PEMEL# *he lac% of an a&&ro&riate &rice signal
drives u& demand "hile, re&ortedly, causing PEMEL to ]]shut? inII some conventional &roduction due to lac% of &rofita4ility#
Several interlocutors &ointed s&ecifically to the need for e&edited &i&eline construction to connect "ith
*eas# 3uic% U#S# federal and state actions to &ermit &i&elines could hel&fully reduce short?term su&&ly &ressures
in Meico and hel& o&en ne" mar%et o&&ortunities for U#S# gas# Bong?term economic gro"th in Meico, ho"ever,
is 4elieved to 4e 4etter served 4y develo&ment of its a4undant domestic resources # As an analyst said,
]] Nou cannot build a future in Mexico based on c$eap gas imports from t$e &'('I I
*he United States government estimates that Meico has one of the largest shale gas reserves in the "orld at
more than RHD trillion cu4ic feet -tcf9 of technically recovera4le reserves, although Meico itself uses estimates as lo" as 'JD tcf#
Much of that shale gas is thought to 4e contained in an etension of the Eagle Cord formation that is already &roducing in *eas#
PEMEL re&ortedly has drilled Aust a handful of e&loratory "ells, and "ith &rices 4eing held do"n 4y the United States gas 4oom, it
has little economic incentive to invest heavily in shale in its o"n right, let alone the o&&ortunity cost of that ca&ital com&ared to
much more lucrative oil# A4sent natural gas &ricing reform, it is unli%ely that PEMEL "ill choose to invest heavily into shale gas#
A"areness of shale gas &otential is gro"ing in MeicoG at the time of the authorsI visit, for eam&le, the Meican
government "as hosting a meeting of shale gas e&erts# Many interlocutors "ere carefully "atching shale develo&ments in the
United States 4oth in terms of direct Ao4 creation and in "ider economic o&&ortunities for &o"er generation, chemicals, and
manufacturing# Develo&ment of shale could 4e &articularly hel&ful for economic gro"th in MeicoIs northern 4order region# *he
authors found that develo&ing MeicoIs shale gas reserves, as "ith technologically challenging ne" oil frontiers, "ill
re=uire energy reform to galvani@e &rivate investment, technology, and e&ertise# At the same time, an
additional level of government ca&acity 4uilding "ill 4e useful to aid official understanding in the geology, economics, and
environmental &rotections necessary for shale &roduction# *he U#S# State De&artmentIs Unconventional Fas *echnical Engagement
Program is "ell &ositioned to ena4le access to needed information, if the Meican Fovernment chooses to &artici&ate#

T$at trades off wit$ +$inese manufacturing
conomist, 1) -*he Economist, ''07J0'7, 2*he rise of Meico5,
htt&600"""#economist#com0ne"s0leaders07'/R(DH'?america?needs?loo%?again?its?
increasingly?im&ortant?neigh4our?rise?meico900EM
MaMana in Meico *he first &lace "here Americans "ill notice these changes is in their sho&&ing malls# China -"ith more than RD
mentions in the &residential de4ates9 is 4y far the 4iggest source of America>s im&orts# ;ut "ages in
Chinese factories have =uintu&led in the &ast ten years and the oil &rice has tre4led, inducing
manufacturers focused on the American mar%et to set u& closer to home# Meico is already the "orld>s 4iggest
e&orter of flat?screen televisions, ;lac%;errys and fridge?free@ers, and is clim4ing u& the ran%ings in cars, aeros&ace and more# <n
&resent trends, 4y 7D'H America "ill im&ort more from Meico than from any other country# 2 Made in +$inaD is
giving way to 8*ec$o en MOxicoD'
+$inese manufacturing is critical to +$inese military moderni:ation
Reed, 1) -.ohn )eed, R0780'7, 2China Caught the U#S# in Manufacturing, $igh?*ech !ea&ons
Might ;e Net5, htt&600defensetech#org07D'70DR0780china?caught?the?u?s?in?education?and?
manufacturing?high?tech?"ea&ons?are?net0900EM
It>s no secret that China -and many other nations9 are catching u& "ith the U#S# in education and manufacturing#
A =uic% Foogle search can reveal the massive gains China>s manufacturing and education sectors have made over
the last three decades# E&erts have long "arned that the U#S# fast sli&&ing far 4ehind it>s industriali@ed
&eers in terms of critical education sectorsG science, technology, engineering and math# *he "orst &art they sayG as the U#S# is
sli&&ing, China is rising # Cirst, it mastered E some "ould argue, it still is mastering E 4asic manufacturing and
it has 4egun investing heavily in higher?end engineering and scientific education, &aving the "ay for it>s
ra&id gains in high?tech manufacturing# No", +$ina is starting to turn t$is investment in
engineering and scientific "nowledge toward producing high?end military gear#
Military moderni:ation causes &'('#+$ina war
+arnegie, 9 -Carnegie Endo"ment, 70R0(, 2*he Im&lications of ChinaIs Military
Moderni@ation5, htt&600carnegieendo"ment#org07DD(0D70DR0im&lications?of?china?s?military?
moderni@ation07%=900EM
*he PBA also designed its moderni@ation &rogram to &re&are for several contingencies# <&en?source data indicate
that China is &re&aring for &ossi4le conflict "ith the United States, &otentially over *ai"an , and is also focused
on 4eing a4le to defeat *ai"an# !ort@el argued that China is close to achieving that goal and is ca&a4le of
dominating the militaries of other Asian &o"ers -ece&ting .a&an9# *he fact that the United States treats China as
an enemy in its strategic &lanning is a driver of Chinese military &lanning, according to !ort@el# Im&lications for the United
States T$e &otential for miscalculation and misreading of intent are the 4iggest threats to the
PBA and the U#S# armed forces, and as the PBA e&ands its area of control into &arts of the Pacific to "hich the U#S# has
traditionally had unfettered access the &otential "ill increase# Confidence?4uilding measures and regular defense consultations are
the 4est "ay to reduce the threat &osed 4y the PBA# $o"ever, !ort@el and Cin%elstein agreed that as long as China>s decision?
ma%ing &rocess remains o&a=ue the United States must maintain a sufficient deterrent# *he U#S# should also ensure that allies are
not selling sensitive military technology to the PBA#
xtinction
(traits Times )" -2No <ne Fains In !ar <ver *ai"an5, R?7/, Beis9
*$E D<<MSDA: SCENA)I< *$E high?intensity scenario &ostulates a cross?strait "ar
escalating into a full?scale "ar 4et"een the US and China# If !ashington "ere to conclude that
s&litting China "ould 4etter serve its national interests, then a full?scale "ar 4ecomes
unavoida4le# Conflict on such a scale "ould em4roil other countries far and near and ?? horror
of horrors ?? raise the &ossi4ility of a nuclear "ar# ;eiAing has already told the US and .a&an &rivately that it considers any
country &roviding 4ases and logistics su&&ort to any US forces attac%ing China as 4elligerent &arties o&en to its retaliation# In the region, this means
South Korea, .a&an, the Phili&&ines and, to a lesser etent, Singa&ore# If China "ere to retaliate, east Asia "ill 4e set on fire# And the conflagration may
not end there as o&&ortunistic &o"ers else"here may try to overturn the eisting "orld order# !ith the US distracted, )ussia may see% to redefine
Euro&eIs &olitical landsca&e# *he 4alance of &o"er in the Middle East may 4e similarly u&set 4y the li%es of Ira=# In south Asia, hostilities 4et"een
India and Pa%istan, each armed "ith its o"n nuclear arsenal, could enter a ne" and dangerous &hase# !ill a full?scale Sino?US "ar lead to a nuclear
"arU According to Feneral Matthe" )idge"ay, commander of the US Eighth Army "hich fought against the Chinese in the Korean !ar, the US had at
the time thought of using nuclear "ea&ons against China to save the US from military defeat# In his 4oo% *he Korean !ar, a &ersonal account of the
military and &olitical as&ects of the conflict and its im&lications on future US foreign &olicy, Fen )idge"ay said that US "as confronted "ith t"o
choices in Korea ?? truce or a 4roadened "ar, "hich could have led to the use of nuclear "ea&ons# If the US had to resort to nuclear "ea&onry to defeat
China long 4efore the latter ac=uired a similar ca&a4ility, there is little ho&e of "inning a "ar against China /D years later, short of using nuclear
"ea&ons# *he US estimates that China &ossesses a4out 7D nuclear "arheads that can destroy maAor American cities# ;eiAing also seems &re&ared to go
for the nuclear o&tion# A Chinese military officer disclosed recently that ;eiAing "as considering a revie" of its Wnon first useW &rinci&le regarding
nuclear "ea&ons# MaAor?Feneral Pan ^hang=iang, &resident of the military?funded Institute for Strategic Studies, told a gathering at the !oodro"
!ilson International Centre for Scholars in !ashington that although the government still a4ided 4y that &rinci&le, there "ere strong &ressures from
the military to dro& it# $e said military leaders considered the use of nuclear "ea&ons mandatory if the country ris%ed dismem4erment as a result of
foreign intervention# Fen )idge"ay said that should that come to &ass, we would see t$e destruction of
civilisation# *here "ould 4e no victors in such a "ar# !hile the &ros&ect of a nuclear
Armaggedon over *ai"an might seem inconceiva4le, it cannot 4e ruled out entirely, for China
&uts sovereignty a4ove everything else#
Mexican manufacturing protects %5RG+$ina destroys it
07, 1) -<ffshore Frou&, R080'7, 2Intellectual Pro&erty Protection6 China vs# Meico5,
htt&600offshoregrou&#com07D'70DR0D80intellectual?&ro&erty?&rotection?china?vs?
meico0900EM
Ideas and %no"ledge are a central &art of creating the goods and services that com&rise the
glo4al trade re&ertoire of countries li%e Meico and China# *he &rotection of intellectual &ro&erty of a
manufacturer might 4e the most im&ortant safeguard# Investing &ersonnel and fiscal resources in innovation
results in the idiosyncratic design, invention, method, re&ute or success or failure of a manufacturer in Meico -or any"here else9,
ena4ling it to achieve advantage over the firms "ith "hich it com&etes in the mar%et&lace# *hese items must 4e sufficiently
&rotected so that a cor&oration is assured that its com&etitive lead "ill not 4e stolen, counterfeited, or used "ithout its authori@ation#
Many countries recogni@e the value of &atents and trademar%s in "orld mar%ets and have ta%en ste&s to im&lement stringent
intellectual &ro&erty &rotection la"s and measures# America>s intellectual &ro&erty industries, "hich de&end on IP defense for their
revenues, greatly contri4ute to the vitality of the U#S# economy, and em4ody a rising &ercentage of our gross domestic &roduct# *his
sector includes not only the co&yright industries, such as movies, musical recordings, and 4oo% &u4lishing, 4ut also 4usinesses that
rely on the value of their trademar%ed 4rands# It also includes &atent industries, such as the &harmaceutical industry and many
manufacturers# Protection of intellectual &ro&erty varies from country to country, and "hen considering the la"s of other countries,
es&ecially "hen considering host countries for offshore manufacturing and management, it is im&ortant to learn the intellectual
&ro&erty &rotection la"s that are in &lace# In Meico, the NAC*A &rotects certain intellectual &ro&erties such as6
co&yright of data, co&yright of sound recordings, trademar%s, &atents or inventions, industrial designs, trade secrets,
and geogra&hical indications# *hese are the minimum standards of &rotection of intellectual &ro&erty that the U#S#, Canada, and
Meico must &rovide in their domestic la"s, 4ut they may &rovide more &rotection than is re=uired under NAC*A# Meican
courts ty&ically res&ect and enforce com&anies> rights to intellectual &ro&erty and the guarantee of
these minimal &rotections gives some significant &eace of mind "hen considering the &ossi4ility of initiating
manufacturing o&erations in Meico# China, &erha&s Mexico6s primary competitor in the
com&etition for direct foreign investment, has very different la"s # China has 4een "idely =uestioned for
4oth the content of its intellectual &ro&erty &rotection la"s, as "ell as their enforcement # China>s
legal system still has many ga&s , it is still "ea%, and it is still develo&ing# Counterfeits are common in
Asia and courts have 4een slo" to enforce or recogni@e intellectual &ro&erty rights#
(olves a laundry list of impactsGdisease, food production, and warming
7%5+, E -Flo4al Intellectual Pro&erty Center, '707H08, 2!hy Are Intellectual Pro&erty )ights
Im&ortantU5, htt&600"""#theglo4ali&center#com0"hy?are?intellectual?&ro&erty?rights?
im&ortant0900EM
Intellectual Pro&erty $el&s Fenerate ;rea%through Solutions to Flo4al Challenges Nearly all of the
1DD &roducts on the !orld $ealth <rgani@ation>s Essential Drug Bist, "hich are critical to saving or im&roving
&eo&le>s lives around the glo4e, came from the )_D?intensive &harmaceutical industry that de&ends on
&atent &rotections# Innovative agricultural com&anies are creating ne" &roducts to hel& farmers
&roduce more and 4etter &roducts for the "orld>s hungry "hile reducing the environmental
im&act of agriculture# IP?driven discoveries in alternative energy and green technologies "ill
hel& im&rove energy security and address climate change#
Mutations ensure diseases cause extinction
.arling 1) -David, Astronomer, 28 Strange !ays the !orld )eally Might End5, SeattleIs ;ig
;log, 1?'H, htt&6004log#seattle&i#com0the4ig4log07D'70D10'H08?strange?"ays?the?"orld?really?
might?end0Uf4TdTfragment, !ashington State University9
<ur 4ody is in constant com&etition "ith a di@@ying array of viruses, 4acteria, and &arasites, many of "hich treat us sim&ly as a
source of food or a vehicle for re&roduction# !hat>s trou4ling is that these micro4es can mutate and evolve at fantastic
s&eed O the more so than%s to the 4urgeoning human &o&ulation O confronting our 4odies "ith ne" dangers every
year# $IX, E4ola, 4ird flu, and anti4iotic?resistant 2su&er 4ugs5 are Aust a fe" of the &athogenic threats to humanity that have
surfaced over the &ast fe" decades# <ur soaring num4ers, u4i=uitous international travel, and the increasing use
of chemicals and 4iological agents "ithout full %no"ledge of their conse=uences, have increased the ris% of
unstoppable pandemics arising from mutant viruses and their il%# ;u4onic &lague, the ;lac% Death, and the
S&anish Clu are vivid eam&les from history of ho" micro4ial agents can decimate &o&ulations# ;ut the conse=uences aren>t
limited to a high 4ody count# !hen the death toll gets high enough, it can disru&t the very fa4ric of society# According
to U#S# government studies, if a glo4al &andemic affecting at least half the "orld>s &o&ulation "ere to stri%e today, health
&rofessionals "ouldn>t 4e a4le to co&e "ith the vast num4ers of sic% and succum4ing &eo&le# *he result of so
many deaths "ould have serious im&lications for the infrastructure, food su&&ly, and security of 7'st century man# !hile an
untreata4le pandemic could stri"e suddenly and &otentially bring civili:ation to its "nees in
wee"s or months, degenerative diseases might do so over longer &eriods# *he most common degenerative disease is cancer#
Every second men and every third "omen in the "estern "orld "ill 4e diagnosed "ith this disease in their lifetime# Degeneration of
our environment through the release of toins and "astes, air &ollution, and inta%e of unhealthy foods is ma%ing this &ro4lem "orse#
If cancer, or some other form of degenerative disease, "ere to 4ecome even more common&lace and stri%e 4efore
re&roduction, or 4ecome infectious -as seen in the transmitted facial cancer of the *asmanian Devil, a carnivorous marsu&ial in
Australia9 the very survival of our s&ecies could 4e t$reatened #

)ac ipr solves economy
(olves t$e economy
7%5+, E -Flo4al Intellectual Pro&erty Center, '707H08, 2!hy Are Intellectual Pro&erty )ights
Im&ortantU5, htt&600"""#theglo4ali&center#com0"hy?are?intellectual?&ro&erty?rights?
im&ortant0900EM
**!e do not endorse gendered language
Intellectual &ro&erty -IP9 contri4utes enormously to our national and state economies# Do@ens of industries
across our economy rely on the ade=uate enforcement of their &atents, trademar%s, and co&yrights,
"hile consumers use IP to ensure they are &urchasing safe, guaranteed &roducts# !e 4elieve IP rights
are "orth &rotecting, 4oth domestically and a4road# *his is "hy6 Intellectual Pro&erty Creates and Su&&orts $igh?
Paying .o4s IP?intensive industries em&loy over // million Americans, and hundreds of millions of
&eo&le "orld"ide# .o4s in IP?intensive industries are e&ected to gro" faster over the net decade than the national average#
*he average "or%er in an IP?intensive industry earned a4out 1D[ more than his counter&art in a
non?IP industry *he average salary in IP?intensive industries &ay V/D,/(R &er "or%er com&ared to the national average of V1H,(RH#
Intellectual Pro&erty Drives Economic Fro"th and Com&etitiveness America>s IP is "orth V/#H
trillion, more than the nominal FDP of any other country in the "orld# IP?intensive industries account for over '01O or
1H[O of total U#S# FDP# *hese industries also have (7#/[ higher out&ut &er "or%er than the national average, valued at
V'1R,//R &er "or%er# IP accounts for (J[ of all U#S# e&orts? "hich amounts to nearly V' trillion# *he direct and indirect economic
im&acts of innovation are over"helming, acounting for more than JD[ of U#S# economic gro"th and em&loyment#

(olvency
1ac solvency
Aff increases ;oint &'('#Mexico oil production
Myers et' Al 1)-!illiam C# Danvers, Staff Director Kenneth A# Myers, .r#, Staff Director U#S# F<XE)NMEN* P)IN*INF
<CCICE ((?/R( !AS$INF*<N 6 7D'7 A MIN<)I*: S*ACC )EP<)* P)EPA)ED C<) *$E USE <C *$E C<MMI**EE <N
C<)EIFN )EBA*I<NS UNI*ED S*A*ES SENA*E O;)!9
*he center&iece of the *;A is the mandate to esta4lish socalled ]]uniti@ationII agreements 4y "hich
com&anies licensed 4y the United States and MeicoIs state oil com&any 5M? would
;ointly develop oil and gas reservoirs that have 4een discovered to etend across the
maritime 4oundary# In effect, uniti@ation agreements "ould "or% similarly to more "ell?%no"n &roduction sharing
agreements -PSAs9, "here4y com&anies involved "ill Aointly develo& a &roAect in order to s&read ris% given that dee& "ater
develo&ments "ill cost 4illions of dollars each# Fiven PEMELIs lac% of e&erience in dee& "ater, the most li%ely outcome is that
I<Cs licensed 4y the United States "ould o&erate the develo&ments and utili@e infrastructure 4ased
on the United States side of the 4order, "hich is more etensive than that of Meico near to the area of o&eration#
$o"ever, the United States does have an interest in PEMEL gaining e&ertise in o&eration in dee&
"ater in order to im&rove the integrity of &otential PEMEL o&erated develo&ments eclusively in
Meican territory# A %ey difference 4et"een the uniti@ation agreements envisioned under the *;A and traditional PSAs is that
&hysical 4arrels &roduced "ill 4e allocated to the legal Aurisdictions of the United States and Meico, &resuma4ly in &ro&ortion to
the amount of reserves found on their res&ective sides of the 4order# *he Meican 4arrels, &resuma4ly, "ill 4e &ro&erty of PEMEL
as a state entity and the U#S# 4arrels "ill 4e treated under standard terms of U#S# licensing in the Fulf of Meico# It is unli%ely that,
from the U#S# &ers&ective, the *;A "ill meaningfully increase U#S# domestic oil &roduction in the near term# *he maritime 4order
area is dee& "ater and "ould re=uire massive investments# Such investments are &ossi4le and should 4e encouraged 4y the U#S#
government, ho"ever, it "ill ta%e years to get through regulatory hurdles and normal &roAect develo&ment needs# $o"ever, the *;A
"ould unloc% the maritime 4order region from moratoria, there4y offering long?term o&&ortunities to increase U#S# domestic
&roduction# *he *;A should 4e seen as a net &ositive to hel&ing reduce U#S# de&endence on im&orts from trou4lesome regions and
4oosting domestic economic activity, and therefore the *;A should 4e vie"ed as a 4enefit for U#S# energy security# ;enefits of
&hysical 4arrels of oil &roduced are &otentially much greater in relative im&ortance on the Meican side of the 4order, "hich is
e&eriencing decline in %ey fields, and that "ould 4e su4stantially 4eneficial to U#S# interests in Meican economic gro"th# As
discussed a4ove, Meico needs ne" oil &roduction# Develo&ing dee& offshore &roduction "ould hel& diversify the Meican oil
&ortfolio, &roviding economic 4enefit to the Meican state "hether that oil is sold for e&ort mar%ets or used domestically#
Moreover, having I<Cs "or%ing "ith PEMEL to 4oost domestic Meican &roduction "ill &rovide
useful commercial o&&ortunities and, im&ortantly, boost confidence t$at Mexico will $ave
significant oil available to export to t$e &nited (tates# As a relia4le, &roimate, and friendly
neigh4or, Mexican oil imports support &'(' energy security' *he *;A contains numerous &rovisions in
antici&ation of dis&utes on allocation of resources under a uniti@ation agreement and im&lementation of those agreements# Begal
analysis of these &rovisions is 4eyond the sco&e of this re&ort# $o"ever, it is a&&arent that lac% of clarity on the legal status of the
dis&ute resolution mechanisms should 4e of concern to the U#S# Congress# *he <4ama administration contends that the agreementIs
ar4itration mechanism is not intended to &roduce 4inding decisions, ho"ever, that is not s&ecifically &rovided for in the tet of the
agreement and "ould 4e different from ar4itration mechanisms in many other international agreements# *he *;A further contains
re=uirements of data sharing and notification of li%ely reserves 4et"een the United States and Meico, o&ening the o&&ortunity for
increased government?togovernment colla4oration on strategic energy &olicy choices# Meico and the United States are relatively
less advanced in effective communication and lin%ages of our energy systems than "e are in less &olitically?controversial economic
areas# Im&roved ties can im&rove understanding and galvani@e coo&eration in often une&ected "ays# In the immediate term, closer
oil sector communication "ill 4e 4eneficial in case of accidents in the Fulf of Meico or in case of significant disru&tions to glo4al oil
su&&lies# <n issues of environmental &rotection and safety, the *;A envisions that the U#S# and Meico in the geogra&hic area under
the agreement "ill have common standards and that regulators from 4oth countries "ill have access to oil and gas develo&ment
facilities "ith the a4ility to order shutdo"ns in 4oth Aurisdictions if necessary# *he <4ama administration contends that means that
Meican environmental and safety standards, and enforcement, "ill have to rise to U#S# levels# *here is no guarantee that &assage of
the *;A "ill &reci&itate systemic im&rovement in Meican environmental and safety enforcement, 4ut any im&rovement is "elcome
4y the Meican safety regulator and should 4e "elcomed in the United States given &ossi4le im&acts of a s&ill on U#S# economic
interests and =uality of life# Perha&s the most im&ortant U#S#?s&ecific 4enefits of the *;A are three?fold# Cirst, the *;A "ill, for
the first time, allo" U#S#?listed I<Cs to "or% in &artnershi& "ith PEMEL, not including service contracts#
Many o4servers are o&timistic that t$e T-A is t$e metap$orical camelIs nose under t$e tent ,
&aving the "ay to 4roader reform in Meico# *here is no guarantee of such an outcome, ho"ever, failure for
t$e &'(' to approve t$e T-A may put a drag on Mexican domestic energy reform
momentum' *he *;A hel&s demonstrate that MeicoIs oil &atrimony can 4e &rotected in a Aoint &roduction regime "ith U#S#
com&anies# It "as suggested 4y some senior officials that &assage of the *;A could hel& &rom&t 4roader
domestic energy reform in Meico# Second, it is unli%ely that the U#S# maritime 4order areas "ould 4e develo&ed
"ithout the *;A, "hereas a PEMEL official indicated desire to 4egin e&loration on the Meican side of the 4order# Potential U#S#
o&&onents of the *;A may argue that given PEMELIs limited a4ility to e&lore in dee& "ater, the real effect of the *;A "ill 4e to
reduce I<CsI com&etitive advantages# In other "ords, the o&&osition argument could state, the U#S# should sim&ly move for"ard
"ith e&loration since our com&anies have the ca&ital and technology to move more =uic%ly than PEMEL# *hat criticism neglects
the reality that, over the long?term, the I<Cs have a greater interest in investing throughout Meican territory than they do in a
sliver of U#S# area along the maritime 4order# *herefore, those I<Cs "ould not ris% enraging the Meican government 4y,
&otentially, draining Meican resources from U#S# territory# *hus, U#S# interests in increased safe and secure
domestic oil production along the 4order will be best met wit$ t$e T-A # Cinally, &assage of the
*;A "ould 4oost U#S#?Meico relations on energy issues, "hich have traditionally lagged# Meican officials roundly e&ressed
su&&ort for the *;A and e&ectation for U#S# ratification in conversation "ith the authors# T$e political impact of not
approving and implementing t$e T-A would set bac" &'('#Mexican relations on
energy s&ecifically and more 4roadly# Each of our countries $as $ot button domestic political
issues t$at ta"e courage for political leaders to address# In Meico, oil is one such issue, and
mem4ers of 4oth the PAN and P)I &ut their &olitical "eight 4ehind ratification in Meico# *he U#S# not fulfilling its side of the
agreement "ould, therefore, 4e seen as a violation of trust and could erode confidence# In the etreme, although unli%ely, if Meico
&roceeds "ith domestic energy reforms, U#S# com&anies could 4e shut out of certain o&&ortunities until the *;A is ratified#
$o"ever, 4ilateral 4enefits of a&&roving the agreement do not re=uire immediate &assageG U#S# commitment can 4e demonstrated
4y the <4ama administration formally su4mitting the *;A for Congressional a&&roval and commencement of Congressional
hearings#
T$e plan allows for a revitali:ation of 5M?, increases /ort$ American oil
production, increases relations, and economies
Harl, 13 PhD in International )elations from USC and President of the Asia Strategy Initiative
-David Karl, /0(0'1, 2*ime for a North American Energy Initiative5,
htt&600monstersa4road#"ord&ress#com0author0davidA%arl0900EM
Meico &ossesses energy reserves so large that they rival Ku"ait>s and it is the third?largest oil su&&lier
-follo"ing Canada and Saudi Ara4ia9 to the United States# Sitting on to& of "hat may 4e the "orld>s fourth?largest reserves of shale
gas, it is also "ell &ositioned to 4enefit from the shale revolution# :et due to nationalistic restrictions that shut out
foreign ca&ital and tech nology, PEMEL has e&erienced shar& &roduction declines in recent years and
is una4le to e&loit dee&?"ater reserves in the Fulf of Meico or onshore resources that re=uire hydraulic
fracturing -2frac%ing59 to etract# Indeed, a ;a%er Institute re&ort t"o years ago "arned that "ithout maAor ne" investments in
e&loration and &roduction the com&any could lose its entire ca&acity to e&ort crude oil "ithin a decade# PEMEL>s ne" head sees
shale develo&ment as a %ey to the country>s economic future 4ut ac%no"ledges that foreign &artnershi&s are a critical factor# *he
regional payoff "ould 4e &rofound if Meico is a4le to re&licate the energy renaissance no" unfolding
in the other NAC*A countries and act in concert "ith them to maimi@e its 4enefits# A recent Citigrou& re&ort argues that surging oil
and natural gas out&ut in the three countries 2"ill eventually turn the glo4al geo&olitics of energy on its head5 and that 2the gro"ing
continental sur&lus of hydrocar4ons &oints to North America effectively 4ecoming the ne" Middle East 4y the net decade#5 A study
4y the Manhattan Institute concurs, noting that 2the total North American hydrocar4on resource 4ase is
more than four times greater than all the resources etant in the Middle East#5 It also estimates that a
NAC*A?style colla4oration in the hydrocar4on sector could yield as muc$ as V( trillion in value
to the North American economy over 7D years# Pros&ective gains li%e these should start &olicyma%ers in !ashington,
<tta"a and Meico City thin%ing in imaginative and coo&erative directions# A first ste& is the im&lementation of the
U#S#?Meico *rans4oundary $ydrocar4ons Agreement -*;$A9, signed a year ago and =uic%ly ratified 4y Meico 4ut no" a"aiting
&assage 4y the U#S# Congress#*** *he accord "ill foster Aoint coo&eration in the e&loration and
develo&ment of oil and gas fields sitting astride the maritime 4order# ;ut an even more im&ortant conse=uence might 4e
sym4olic O sending a concrete message a4out the advantages of 4ilateral &artnershi& Aust as Meico
4egins to de4ate the Pena Nieto energy reforms#
)ac solvency ev
T*A s$ould progress legislatively
(immons 13 O )egulatory and state affairs director at the Institute for Energy )esearch
-Daniel, 2IE)>s Simmons to *estify on $ydrocar4ons Agreement,5 IE), J07J0'1, IE),
htt&600"""#instituteforenergyresearch#org07D'10DJ07J0testimony?of?daniel?simmons?
su4committee?on?energy?and?mineral?resources0900;"ang
North America is an energy rich continent# <ur energy issues are not issues of a lac% of su&&ly, 4ut a lac% of access to energy
resources# *he *rans4oundary $ydrocar4on Agreement is one "ay the federal government should
4e moving for"ard to grant more access to ta&ayer?o"ned energy resources# *he agreement is
a good agreement and should e&editiously move for"ard, 4ut it should not have ta%en more
than a year for the Administration to su4mit *rans4oundary $ydrocar4on Agreement to
Congress#
&( s$ould ratify T*A
(now 13 O <il and Fas .ournal Editor -Nic%, 2$ouse &anel as%s <4ama to ta%e energy ste&s
"ith Meico, Canada,5 <F., 10'J0'1, htt&600"""#ogA#com0articles07D'10D10house?&anel?as%s?
o4ama?to?ta%e?energy?ste&s?"ith?meico??canada#html900;"ang
)atifying *;$A also "ould encourage US inde&endents and Meico>s state?o"ned Petroleos
Meicanos -Peme9 to Aointly develo& resources in the gulf, noted Kyle Isa%o"er, American Petroleum
Institute>s vice?&resident for regulatory and economic &olicy#
2 *his agreement "ill &rovide legal certainty to US Pinde&endentsQ, "hich "ill encourage
investment in ne" energy develo&ment, creating Ao4s and s&urring economic gro"th,5 he said# *he
&resident should resolve lingering uncertainty over "hether he intends *;$A to 4e a treaty or
an eecutive agreement, Isa%o"er added# 2A&&ro&riate legislative action should then =uic%ly 4e ta%en
to ratify the treaty, if a&&lica4le, and &ass im&lementing legislation,5 he said#
Add#ons
)ac biofuels
)ac iKl
(witc$ to et$anol coming nowGnew c$eap fuel is necessary to prevent t$is
Tibbles, P N;C Ne"s Corres&ondent -Kevin *i44les, J0'70R, 2)efineries slo"ly s"itch to
ethanol5,
htt&600"""#n4cne"s#com0id0'77H881H0ns0n4cTnightlyTne"sT"ithT4rianT"illiams0t0refineri
es?slo"ly?s"itch?ethanol0`#Uf&vv8BXCSo900EM
In the la4, it>s a clear li=uid, and at the &um& itIs li=uid gold6 Ethanol is the corn 4ased?clean air additive U#S#
refiners are scram4ling to add to the nationIs fuel su&&ly# As President ;ush e&lained it to a Mil"au%ee
audience on Ce4# R, 2*he more ethanol "e use, the less crude oil "e consume#5 It "ill also 4e a 4oon for
farmers, li%e )on Cluegel of Bena, Ill# 2*he rene"a4le fuel is a "in?"in situation for everyone,5 he says# ;ut critics charge ethanol is a
money gra4# ItIs 4ig 4usiness for agricultural giants li%e Archer Daniels Midland, "hose television ad says, 2*he "orldIs demand for
energy "ill never sto&, "hich is "hy ADM "ill never sto&#5 Bast summerIs energy 4ill mandated ethanolIs use
and, 4y May /, many refineries "ill s"itch# *hat ne" demand has &ushed ethanol to V7#HD a gallon E more than t"ice
"hat it costs to ma%e#
laundry list impact
-iofuels destroy ecosystemsGpesticides, monocultures, deforestationGalso causes
deforestation, decreases fuel production, and $urts small farms
7,+, 12 -Flo4al Corest Coalition, last u&dated '707J0'D, 2;iofuels6
A Disaster in the Ma%ing5, htt&600"""#glo4alforestcoalition#org0nl0"&?
content0u&loads07D'D0'70;iofuelsadisasterinthema%ing#&df900EM
Mean"hile, international trade in 4iofuels is already causing a negative im&act on food sovereignty, rural
livelihoods, forests and other ecosystems, and these negative im&acts are e&ected to accumulate
ra&idly# Barge?scale, e&ort?oriented &roduction of 4iofuel re=uires large?scale monocultures of trees,
sugarcane, corn, oil&alm, soy and other cro&s# *hese monocultures already form the num4er one cause of
rural de&o&ulation and deforestation "orld"ide# *he ra&idly increasing demand for these cro&s as a source
of 4iofuel "ill lead to6 increased land com&etition leading to further land concentration, the marginali@ation of small?
scale agriculture and the "ides&read conversion of forests and other ecosystemsG ara4le land
that is currently used to gro" food 4eing used to gro" fuel, leading to staggering food &rices and
causing hunger, malnutrition and im&overishment amongst the &oorest sectors of societyG rural unem&loyment
and de&o&ulationG the destruction of the traditions, cultures, languages and s&iritual values of
Indigenous Peo&les and rural communitiesG the etensive use of agro?chemicals, "hich
deteriorate human health and ecosystems the destruction of "atersheds and the &ollution of
rivers, la%es and streamsG droughts and other local and regional climatic etremesG and the etensive use of genetically
modified organisms leading to un&recedented ris%s# *hese effects "ill have &articularly a negative im&act on "omen and Indigenous
Peo&les, "ho are economically marginali@ed and more de&endent on natural resources li%e "ater and forests# ;iofuels are a
disaster in the ma%ing# Eisting legally 4inding standards, regulations and enforcement mechanisms in the -&otential9
&roduction countries are a4solutely insufficient to &revent the a4ove?mentioned im&acts# International demand for 4iofuels is
already sur&assing su&&ly in %ey countries li%e Malaysia and ;ra@il, giving an im&ortant &ush to the e&ansion of destructive cro&s
li%e oil &alm and sugar cane# Initiatives to &roduce these monocultures 2res&onsi4ly5 are reAected 4y many NF<s 7 and social
movements in the &roduction countries themselves, "ho have em&hasi@ed that the a4ove?mentioned negative social and
environmental im&acts are inherent to the large?scale &roduction of monocultures#
5esticides cause endocrine disruption, culminating in extinction ### can6t
reproduce
/Q nvironment 3 -2Pesticides,5 htt&600"""#nAenvironment#org0&esticides#htm9
Not only are current gardening &ractices harmful to local ecosystems, 4ut also e&anding pesticide use a&&ears to
t$reaten t$e fertility and viability of $uman life# *heo Co4urnIs etensive research in <ur Stolen Cuture
suggests that the declining s&erm count "orld"ide and the a4errations in animal seuality may 4e the result of
endocrine disru&ting chemicals in our environment# Many &esticides mimic human hormones
there4y sending inaccurate signals to our endocrine systems# W*hey 4ind to intracellular rece&tor &roteins for steroid hormones and
evo%e hormonal effects in animals and humans#W *hese hormone?mimic%ing chemicals tric% the estrogen rece&tors disru&ting
normal endocrine res&onse# *his disru&tion has 4een lin%ed to the alarming increase in the U#S# of
re&roductive organ cancers# Information a4out endocrine system disru&ters "as not availa4le to EPA "hen these
&esticides "ere registered -not a&&roved9# *he chemical industry is resisting testing for EDs -endocrine system disru&ters9#
$o"ever, it is interesting to note that Fer4erI 4a4y foods tolerate D[ &esticide residues in 4a4y food and have 4anned the use of
genetically altered seed in their foods#
.eforestation causes extinction
(antos EE -Miguel A#, Professor of Ecology and Environmental Science O ;aruch College, 2*he
Environmental Crisis,5 &g# 1/?1R9
In addition, natural forests &rovide recreation and uni=ue scenic 4eauty "hile at the same time serving as the 4asis for natural
communities that &rovide life su&&ort to organisms -including &eo&le9# As mentioned, one vital 4y?&roduct of &lant
&hotosynthetic activity is oxygen, "hich is essential to $uman existence # In addition, forests remove
&ollutants and odors from the atmos&here# *he "ilderness is highly effective in meta4oli@ing
many toic su4stances# *he atmos&heric concentration of &ollutants over the forest, such as &articulates and sulfur dioide,
are measura4ly 4elo" that of adAacent areas -see Cigure 7#1 9# In vie" of their ecologic role in ecosystems, the im&act of s&ecies
etinction may 4e devastating# *he rich diversity of s&ecies and the ecosystems that su&&ort them are intimately
connected to t$e long#term survival of $uman"ind# As the historic conservationist Aldo Beo&old stated
in '8J8, *he outstanding scientific discovery of the t"entieth century is not television or radio 4ut the com&leity of the land
organisms#### *o %ee& every cog and "heel is the first &recaution of intelligent tin%ering#
''
An endangered s&ecies may have a
significant role in its community# Such an organism may control the structure and functioning of the community through its
activities# *he sea otter, for eam&le, in relation to its si@e, is &erha&s the most voracious of all marine mammals# *he otter feeds on
sea mollus%s, sea urchins, cra4s, and fish# It needs to eat more than 7D &ercent of its "eight every day to &rovide the necessary
energy to maintain its 4ody tem&erature in a cold marine ha4itat# *he etinction of such %eystone or controller s&ecies from the
ecosystem "ould cause great damage# Its etinction could have cascading effects on many s&ecies, even causing
secondary etinction# *raditionally, s&ecies have al"ays evolved along "ith their changing environment# As disease organisms
evolve, other organisms may evolve chemical defense mechanisms that confer disease resistance# As the "eather 4ecomes drier, for
eam&le, &lants may develo& smaller, thic%er leaves, "hich lose "ater slo"ly# *he environment, ho"ever, is no" develo&ing and
changing ra&idly, 4ut evolution is slo", re=uiring hundreds of thousands of years# If s&ecies are allo"ed to 4ecome etinct, t$e
total 4iological diversity on art$ will be greatly reducedG therefore, the &otential for natural ada&tation and
change also "ill 4e reduced, thus endangering the diversity of future $uman life?su&&ort systems#
Monocultures cause extinction
,owler and Mooney, E2 -Cary and Pat, 2)ural Advancement Cund International, Shattering6
Cood, Politics, and the Boss of Fenetic Diversity5, '88D, &g# i9
!hile many may &onder the conse=uences of glo4al "arming, &erha&s the 4iggest single environmental catastro&he in human
history is unfolding in the garden# !hile all are rightly concerned a4out the &ossi4ility of nuclear "ar, an e=ually
devastating time 4om4 is tic%ing a"ay in the fields of farmers all over the "orld# 4oss of genetic diversity
in agricultureEsilent, ra&id, ineora4leEis leading us to a rende@vous "ith extinctionEto the doorste& of
hunger on a scale "e refuse to imagine# *o sim&lify the environment as "e have done "ith agriculture is to destroy
the com&le interrelationshi&s that hold the natural "orld together# )educing the diversity of life, "e
narro" our o&tions for the future and render our o"n survival more &recarious# It is life at the end of the
lim4# *hat is the su4Aect of this 4oo%# Agronomists in the Phili&&ines "arned of "hat 4ecame %no"n as southern corn leaf 4light in
'DR'#I *he disease "as re&orted in Meico not long after# In the summer of '8RH, the first faint hint that the 4light "as in the United
States came from seed gro"ers in the Mid"est# *he danger "as ignored# ;y the s&ring of '8(D' the disease had ta%en hold in the
Clorida corn cro&# ;ut it "as not until corn &rices lea&t thirty cents a 4ushel on the Chicago ;oard of *rade that the "orld too%
noticeG 4y then it "as AugustEand too late# ;y the close of the year, Americans had lost fifteen &ercent of their most im&ortant cro&
Emore than a 4illion 4ushels# Some southern states lost half their harvest and many of their farmers# !hile consumers suffered in
the grocery stores, &roducers "ere out a 4illion dollars in lost yield# And the disaster "as not solely domestic# U#S#
seed e&orts may have s&read the 4light to Africa, Batin America and Asia#
(mall farms solve extinction
-oyce = -.ames, Professor of Economics O University of Massachusetts?Amherst, 2A Cuture for
Small CarmsU5, .uly,
htt&600"""#&eri#umass#edu0fileadmin0&df0"or%ingT&a&ers0"or%ingT&a&ersT/'?
'DD0!PHR#&df9
*here is a future for small farms# <r, to 4e more &recise, there can 4e and should 4e a future for them# Fiven the de&endence
of Nmodern> lo"?diversity agriculture on Ntraditional> high?diversity agriculture, the long?term food security
of human%ind "ill de&end on small farms and their continued &rovision of the environmental service of in situ
conservation of cro& genetic diversity# Policies to su&&ort small farms can 4e advocated, therefore, not merely as a matter of
sym&athy, or nostalgia, or e=uity# Such &olicies are also a matter of $uman survival # *he diversity that
under&ins the sustaina4ility of "orld agriculture did not fall from the s%y# It "as 4e=ueathed to us 4y the
JDD generations of farmers "ho have carried on the &rocess of artificial selection since &lants "ere first domesticated# Until
recently, "e too% this diversity for granted# *he ancient reservoirs of cro& genetic diversity, &lant geneticist .ac% $arlan -'8(/, &#
R'89 "rote three decades ago, Nseemed to most &eo&le as inehausti4le as oil in Ara4ia#> :et, $arlan "arned, Nthe s&eed "hich
enormous cro& diversity can 4e essentially "i&ed out is astonishing#>
+ultural survival is "ey to $uman survival
+lec$ 4am )" -Maivan, Xisiting Associate Professor O American University !ashington
College of Ba", 2At *he Edge of the State6 Indigenous Peo&les and Self?Determination5, &g# 7D/?
7DR9
Nevertheless, as anthro&ologists %no", ethnicity is 4oth an ena4ling and an inesca&a4le condition of human eistence# It is a
collective system of meaning that generates social energy "hich can 4e &ut to constructive and destructive uses e=ually#
Stavenhagen "rites6 Cultures are com&le &atterns of social relationshi&s, material o4Aects, and s&iritual values that give
meaning and identity to community life and are a resource for solving the &ro4lems of everyday life# *hat some very
ugly cam&aigns in modern history, usually unleashed 4y the destructive economic and military &olicies of the "orld>s &o"erful
states, have ta&&ed, frighteningly successfully, into ethnic energy is undenia4le# ;ut it is Aust as undenia4le that "nowledgeE
of the universe, of a s&ecific &art of it, of "or%a4le social relationshi&s, of human natureEt$at is crucial to the &roAect of
$uman survival remains se&arately encoded in the distinctive cultures of eth nic grou&s# No
human community or ethnic grou& can construct an informed and meaningful future if it is cut off from its
cultural &ast# And alienation from meaning, as much as e&loited meaning, can lead to violence#
groundwater impact
T$at destroys t$e biosp$ere and causes groundwater contamination
5ec", 9 -.ohn Pec%, ''0J0(, 2*he *hreat of Agrofuels Industriali@ed FM< Monocultures !ill
<nly $urt Carmers in Agrofuels5, htt&600"""#n"rage#org0content0threat?agrofuels?
industriali@ed?gmo?monocultures?"ill?only?hurt?farmers900EM
As concerns a4out &ea% oil mount, many &eo&le are declaring agrofuels to 4e the latest &anacea for saving
civili@ation from its im&ending colla&se# Pro&elling this 4and"agon is a "hole gaggle of venture ca&italists, free trade advocates,
farm commodity grou&s, agri4usiness giants, 4iotech outfits, and yes the oil giants and car ma%ers# As detailed in the .uly 7DD( issue
of Seedling -availa4le online at """#grain#org9, many of the 4iggest agrofuel 4oosters are familiar o&&onents to those no" struggling
for glo4al Austice, food sovereignty, and land reform# At the to& of the list one finds such names as6 ADM, Cargill, ;unge, ConAgra,
Dreyfus, DuPont, Syngenta, Monsanto, Maru4enAi, *ate _ Byle, !yerhauser, *em4ec, ;ritish Petroleum, Misui, )oyal Dutch Shell,
Chevron, Mitsu4ishi, Petro4ras, *otal, ;arclays, Morgan Stanley, Foldman Sachs, Societe Fenerale, and the Carlyle Frou&# Not
sur&risingly, the InterAmerican Ethanol Commission is also led 4y other neoli4eral glo4ali@ation cheerleaders such as Clorida
governor, .e4 ;ushG ;ra@ilIs former Minister of Agriculture, )o4erto )odriguesG and Buis Moreno, the &resident of the Inter?
American Develo&ment ;an%# Contrary to their green"ashed image, 7'st century agrofuels 4ear little
resem4lance to the homegro"n energy sources of yesteryear# It is one thing to fill your car tan% "ith used
vegeta4le oil and =uite another to 4e 4ulldo@ing rainforests and dis&lacing &easants for the sa%e of glo4etrotting commodities#
!ood, &eat, and other 4iomass have 4een 4urned for eons, "hile the utility of &lant?derived li=uid fuels "as first reali@ed in the mid
'8th century, "ell 4efore &etroleum# In fact, "hen )udolf Diesel first demonstrated his ne" fangled engine at the !orld Ehi4ition
in Paris in 'H8H he ran it on &eanut oil# $enry CordsI early cars "ere designed to run on ethanol derived from hem&, 4ut 4y the
'81Ds ;ig <il had cons&ired to s=uash grassroots alternatives# *oday, if you "ant energy free from cor&orate control you have to do
it yourself, such as Amish farmers "ho coo% "ith "ood stoves or ;ougainville re4els that run their vehicles on coconut oil# Modern
cor&orate outfits demand high volume su&&ly from industrial monocultures of corn, soy4eans, sugar cane, and increasingly &alm oil#
Most ironic is to see the vehicles of organic co?o&s driving around the Mid"est &o"ered 4y 4iotech agrofuels# Fiven ho" reluctant
most &eo&le are to consume genetically engineered foods directly, the only other outlet for these du4ious W"onderW# cro&s is as high
fructose corn syru&, factory farm livestoc% rations, or agrofuel feedstoc%s# In the research &i&eline are agrofuels derived from yet
other food sources cassava, "heat, 4arley, as "ell as cellulosic ethanol derived from s"itchgrass, cro& residue, and even 4iotech
trees# Some scientists are also "or%ing on genetically engineered algae for agrofuel &roduction# *he maAority of agrofuels also
come from industrial refineries that are Aust as fossil fuel intensive and ecologically destructive
as any &etroleum counter&art# !e are not tal%ing a4out grand&aIs old moonshine still# *he notorious Fo&her State
Ethanol Plant in St# Paul, MN, "hich finally closed in 7DDJ, "as emitting a 71D tons of volatile organic com&ounds -X<Cs9 from
drying corn mash into densely &o&ulated neigh4orhoods each year seven times the legal limit# Bocal "ater ta4les have dro&&ed 4y 1D
feet since the U!FP ethanol &lant 4egan its o&eration in Criesland, !I, consuming a "ho&&ing '(R million gallons annually# Much
of this is dum&ed as H8C "aste"ater 4ac% into a local stream# Many critics e&ect ethanol &lants to eventually
cause "ides&read ground"ater contamination as occurred in CA "ith methyl tertiary 4utyl ether -M*;E9# )ec%less
M*;E &roduction affected the drin%ing "ater su&&ly of J/ million &eo&le and led to a successful 7DD' la"suit
against 'H energy com&anies see%ing V1DD million in damages# *he lesson the agrofuel industry too% a"ay from the M*;E case,
though, "as not to clean u& its act 4ut to see% a lia4ility "aiver, similar to "hat the U#S# nuclear industry enAoys, in the last federal
energy 4ill# Cortunately, this &loy as &art of the last federal energy 4ill de4ate "as narro"ly defeated 4y a coalition of consumer
advocates, local governments, and environmental grou&s#
7roundwater contamination destroys biodiversity
-erg"amp, 2P O head of the !ater Programme at UCN, fello" at IUCN>s Flo4al !ater
Programme on ground"ater and river 4asin management -Fer, 2Fround"ater and Ecosystem
Services6 to"ards their sustaina4le use5, International Sym&osium on Fround"ater
Sustaina4ility, March 'D, 7DDR, htt&600aguas#igme#es0igme0ISF!AS0Ponencias ISF!AS0'1?
;erg%am&#&df900.Kahn
Fround"ater is an im&ortant com&onent to &roviding ecosystem services# Cor eam&le, a=uifers are connected to a greater
ecological and hydrological landsca&e that includes adAacent ri&arian areas, u&land terrestrial ecosystems, and surrounding river
4asins -N)C, 7DDJ9# Ecosystems that de&end on ground"ater include terrestrial vegetation , river 4ase
flo" systems, a=uifer and cave ecosystems, "etlands, terrestrial fauna , and estuarine and near?
shore ecosystems -Sinclair Knight Mer@, 7DD'9# Fround"ater associated ecosystem services &rovide su&&ort to a "ide range of
&roduction and consum&tion &rocesses, "hich have high economic value -Emerton and ;os, 7DDJ9# In this section, "e discuss the
"ays in "hich ground"ater &rovides ecosystems in the form of &rovisioning, regulating, su&&orting and cultural services# Cor
eam&le, discharge to streams and rivers may &rovide essential nutrients to a=uatic life and su&&ort do"nstream users of "ater for
drin%ing or irrigation -N)C, '88(9# *hese ecosystems de&end on several ground"ater characteristics, "hich include the =uality of
"ater, discharge flu from an a=uifer, and the level of &ressure of ground"ater -Sinclair Knight Mer@, 7DD'9# Small changes
can &otentially cause etensive damage to de&endent ecosystems # In addition "e eamine ho" ecosystem
services, such as climate regulation and land?use are critical to maintaining ground"ater systems# *he challenge is to use
ground"ater and interrelated ecosystem services in a sustaina4le manner to &rovide for the &resent "ithout
com&romising the needs of future generations # *he MEA classifies fresh "ater -including ground"ater9 as a
&rovisioning service, "hich is defined as 2&roducts o4tained from ecosystems5 -MEA, 7DD/, &#JD9# Most fresh"ater is not in la%es
and rivers, 4ut in a=uifers# In fact, ground"ater is the earth>s largest accessi4le store of fresh "ater
-ecluding ice sheets and glaciers9 and constitutes a4out 8J[ of all fresh "ater -!ard and )o4inson,
'88D9# Fround"ater is also an integral com&onent of regulating, su&&orting and cultural ecosystem services# <ne of the critical
functions of ground"ater as a &rovisioning service is its storage and retention for domestic, industrial and agricultural uses# As
many as t"o 4illion &eo&le de&end directly u&on a=uifers for drin%ing "ater, and JD[ of the
"orld>s food is &roduced 4y irrigated agriculture that relies heavily on ground"ater -Morris et al#,
7DD19#
xtinction
Noung, 12 O Ph#D# in costsal marine evology, mem4er of the Academy of Natural Sciences,
-)uth, 2;iodiversity6 "hat it is and "hy it>s im&ortant5, Ce4ruary 8, 7D'D, *al%ingNature,
htt&600"""#tal%ingnature#com07D'D0D704iodiversity04iodiversity?"hat?and?"hy0900.Kahn
Different s&ecies "ithin ecosystems fill &articular roles, they all have a function, they all have a
niche# *hey interact "ith each other and the &hysical environment to &rovide ecosystem services
that are vital for our survival # Cor eam&le &lant s&ecies convert car4on dioide -C<79 from the atmos&here and
energy from the sun into useful things such as food, medicines and tim4er # Pollination carried out 4y insects
such as 4ees ena4les the &roduction of H of our food cro&s # Diverse mangrove and coral reef
ecosystems &rovide a "ide variety of ha4itats that are essential for many fishery s&ecies# *o ma%e it
sim&ler for economists to com&rehend the magnitude of services offered 4y 4iodiversity, a team of researchers estimated their value
O it amounted to VUS11 trillion &er year# 2;y &rotecting 4iodiversity "e maintain ecosystem services5 Certain s&ecies &lay a
2 %eystone 5 role in maintaining ecosystem services# Similar to the removal of a %eystone from an arch, the removal of
these s&ecies can result in the colla&se of an ecosystem and the su4se=uent removal of ecosystem
services# *he most "ell %no"n eam&le of this occurred during the '8th century "hen sea otters "ere almost hunted to etinction
4y fur traders along the "est coast of the USA# *his led to a &o&ulation e&losion in the sea otters> main source of &rey, sea urchins#
;ecause the urchins gra@e on %el& their 4ooming &o&ulation decimated the under"ater %el& forests# *his loss of ha4itat led to
declines in local fish &o&ulations# Sea otters are a %eystone s&ecies once hunted for their fur -Image6 Mi%e ;aird9 Eventually a treaty
&rotecting sea otters allo"ed the num4ers of otters to increase "hich inturn controlled the urchin &o&ulation, leading to the recovery
of the %el& forests and fish stoc%s# In other cases, ecosystem services are maintained 4y entire functional grou&s, such as a&e
&redators -See .eremy $ance>s &ost at Monga4ay9# During the last 1/ years, over fishing of large shar% s&ecies along the US Atlantic
coast has led to a &o&ulation e&losion of s%ates and rays# *hese s%ates and rays eat 4ay scallo&s and their out of control &o&ulation
has led to the closure of a century long scallo& fishery# *hese are Aust t"o eam&les demonstrating ho" 4iodiversity can maintain the
services that ecosystems &rovide for us, such as fisheries# <ne could argue that to maintain ecosystem services "e don>t need to
&rotect 4iodiversity 4ut rather, "e only need to &rotect the s&ecies and functional grou&s that fill the %eystone roles# $o"ever, there
are a cou&le of &ro4lems "ith this idea# Cirst of all, for most ecosystems "e don>t %no" "hich s&ecies are the
%eystones\ Ecosystems are so com&le that "e are still discovering "hich s&ecies &lay vital roles in maintaining them# In some
cases its grou&s of s&ecies not Aust one s&ecies that are vital for the ecosystem# Second, even if "e did com&lete the enormous tas% of
identifying and &rotecting all %eystone s&ecies, "hat 4ac%?u& &lan "ould "e have if an unforseen event -e#g#
&ollution or disease9 led to the demise of these N%eystone> s&ecies U !ould there 4e another s&ecies to save the day
and ta%e over this roleU Classifying some s&ecies as N%eystone> im&lies that the others are not im&ortant# *his may lead to the non?
%eystone s&ecies 4eing considered ecologically "orthless and su4se=uently over?e&loited# Sometimes "e may not even %no" "hich
s&ecies are li%ely to fill the %eystone roles# An eam&le of this "as discovered on Australia>s Freat ;arrier )eef# *his research
eamined "hat "ould ha&&en to a coral reef if it "ere over?fished# *he 2over?fishing5 "as simulated 4y fencing off coral 4ommies
there4y ecluding and removing fish from them for three years# ;y the end of the e&eriment, the reefs had changed from a coral to
an algae dominated ecosystem O the coral 4ecame overgro"n "ith algae# !hen the time came to remove the fences the researchers
e&ected her4ivorous s&ecies of fish li%e the &arrot fish -Scarus s&&#9 to eat the algae and ena4le the reef to s"itch 4ac% to a coral
dominated ecosystem# ;ut, sur&risingly, the shift 4ac% to coral "as driven 4y a su&&osed Nunim&ortant> s&ecies O the 4at fish -Plata
&innatus9# *he 4at fish "as &reviously thought to feed on inverte4rates O small cra4s and shrim&, 4ut "hen offered a 4ig &atch of
algae it turned into a hungry her4ivore O a co" of the sea O gra@ing the algae in no time# So a fish &reviously thought to 4e
Nunim&ortant> is actually a %eystone s&ecies in the recovery of coral reefs overgro"n 4y algae\ !ho %no"s ho" many other s&ecies
are out there "ith un%no"n ecosystem roles\ In some cases it>s easy to see "ho the %eystone s&ecies are 4ut in many ecosystems
seemingly unim&ortant or redundant s&ecies are also ca&a4le of changing niches and maintaining ecosystems# *he more
4iodiverse an ecosystem is , the more li%ely these s&ecies "ill 4e &resent and the more resilient an ecosystem is
to future im&acts# Presently "e>re only scratching the surface of understanding the full im&ortance of 4iodiversity and ho" it hel&s
maintain ecosystem function# *he sco&e of this tas% is immense# In the meantime, a "ise insurance &olicy for maintaining
ecosystem services "ould 4e to conserve 4iodiversity # In doing so, "e increase the chance of maintaining our ecosystem
services in the event of future im&acts such as disease, invasive s&ecies and of course, climate change# *his is the international
year of 4iodiversity O a time to recogni@e that 4iodiversity ma%es our survival on this &lanet &ossi4le and that
our &rotection of 4iodiversity maintains this service#
(afe water is also "ey to agriculture
,A0, EP O Cood and Agriculture <rgani@ation of the United Nations, -2Cha&ter '6 Introduction
to agricultural "ater &ollution5, Natural )esources Management and Environment De&artment
of the United Nations Cood and Agriculture <rgani@ation,
htt&600"""#fao#org0docre&0!7/8HE0"7/8HeDJ#htm900.Kahn
Second only to availa4ility of drin%ing "ater, access to food su&&ly is the greatest &riority# $ence, agriculture is a
dominant com&onent of the glo4al economy# !hile mechani@ation of farming in many countries has resulted in a
dramatic fall in the &ro&ortion of &o&ulation "or%ing in agriculture, the &ressure to &roduce enough food has had a
"orld"ide im&act on agricultural &ractices# In many countries, this &ressure has resulted in e&ansion into marginal
lands and is usually associated "ith su4sistence farming# In other countries, food re=uirements have re=uired
e&ansion of irrigation and steadily increasing use of fertili@ers and &esticides to achieve and
sustain higher yields# CA< -'88Da9, in its Strategy on !ater for Sustaina4le Agricultural Develo&ment, and the United
Nations Conference on Environment and Develo&ment -UNCED9 in Agenda 7', Cha&ters 'D, 'J and 'H -UNCED, '8879 have
highlighted the challenge of securing food su&&ly into the 7'st century# Sustaina4le agriculture is one of the greatest challenges#
Sustaina4ility im&lies that agriculture not only secure a sustained food su&&ly, 4ut that its
environmental, socio?economic and human health im&acts are recogni@ed and accounted for
"ithin national develo&ment &lans# CA<Is definition of Sustaina4le agricultural develo&ment a&&ears in ;o '# It is "ell
%no"n that agriculture is the single largest user of fresh"ater resources, using a glo4al average of (D[ of all surface "ater su&&lies#
Ece&t for "ater lost through eva&otrans&iration, agricultural "ater is recycled 4ac% to surface
"ater and0or ground"ater# $o"ever, agriculture is 4oth cause and victim of "ater &ollution # It is
a cause through its discharge of &ollutants and sediment to surface and0or ground"ater, through net loss of soil 4y &oor agricultural
&ractices, and through salini@ation and "aterlogging of irrigated land# It is a victim through use of "aste"ater and &olluted surface
and ground"ater "hich contaminate cro&s and transmit disease to consumers and farm "or%ers# Agriculture eists "ithin
a sym4iosis of land and "ater and, as CA< -'88Da9 ma%es =uite clear, W### a&&ro&riate ste&s must 4e ta%en to ensure that
agricultural activities do not adversely affect "ater =uality so that su4se=uent uses of "ater for different &ur&oses are not im&aired#W
Sagardoy -CA<, '881a9 summari@ed the action items for agriculture in the field of "ater =uality as6 h esta4lishment and o&eration of
cost?effective "ater =uality monitoring systems for agricultural "ater uses# h &revention of adverse effects of
agricultural activities on "ater =uality for other social and economic activities and on "etlands,
inter alia through o&timal use of on?farm in&uts and the minimi@ation of the use of eternal
in&uts in agricultural activities# h esta4lishment of 4iological, &hysical and chemical "ater =uality criteria for agricultural
"ater users and for marine and riverine ecosystems# h &revention of soil runoff and sedimentation# h &ro&er dis&osal of se"age from
human settlements and of manure &roduced 4y intensive livestoc% 4reeding# h minimi@ation of adverse effects from agricultural
chemicals 4y use of integrated &est management# h education of communities a4out the &ollution im&acts of the use of fertili@ers and
chemicals on "ater =uality and food safety# *his &u4lication deals s&ecifically "ith the role of agriculture in the field of fresh"ater
=uality# Categories of non?&oint source im&acts ? s&ecifically sediment, &esticides, nutrients, and &athogens ? are identified together
"ith their ecological, &u4lic health and, as a&&ro&riate, legal conse=uences# )ecommendations are made on evaluation techni=ues
and control measures# Much of the scientific literature on agricultural im&acts on surface and ground"ater =uality is from develo&ed
countries, reflecting 4road scientific concern and, in some cases, regulatory attention since the '8(Ds# *he scientific findings and
management &rinci&les are, ho"ever, generally a&&lica4le "orld"ide# *his &u4lication does not deal "ith "ater =uality im&acts
caused 4y food &rocessing industries insofar as these are considered to 4e &oint sources and are usually su4Aect to control through
effluent regulation and enforcement# !ater =uality as a glo4al issue Agriculture, as the single largest user of
fresh"ater on a glo4al 4asis and as a maAor cause of degradation of surface and ground"ater
resources through erosion and chemical runoff, has cause to 4e concerned a4out the glo4al
im&lications of "ater =uality# *he associated agrofood?&rocessing industry is also a significant source of organic &ollution
in most countries# A=uaculture is no" recognised as a maAor &ro4lem in fresh"ater, estuarine and coastal environments, leading to
eutro&hication and ecosystem damage# *he &rinci&al environmental and &u4lic health dimensions of the glo4al fresh"ater =uality
&ro4lem are highlighted 4elo"6 h Cive million &eo&le die annually from "ater?4orne diseases# h Ecosystem dysfunction and
loss of 4iodiversity# h Contamination of marine ecosystems from land?4ased activities# h
Contamination of ground"ater resources# h Flo4al contamination 4y &ersistent organic &ollutants# E&erts &redict that, 4ecause
&ollution can no longer 4e remedied 4y dilution -i#e# the flo" regime is fully utili@ed9 in many countries, fresh"ater =uality "ill
4ecome the &rinci&al limitation for sustaina4le develo&ment in these countries early in the net century# *his WcrisisW is &redicted to
have the follo"ing glo4al dimensions6 h Decline in sustaina4le food resources -e#g# fresh"ater and coastal
fisheries9 due to &ollution# h Cumulative effect of &oor "ater resource management decisions 4ecause of inade=uate "ater
=uality data in many countries# h Many countries can no longer manage &ollution 4y dilution, leading to higher levels of a=uatic
&ollution# h Escalating cost of remediation and &otential loss of Wcredit"orthinessW# *he real and &otential loss of develo&ment
o&&ortunity 4ecause of diversion of funds for remediation of "ater &ollution has 4een noted 4y many countries# At the '88J E&ert
Meeting on !ater 3uantity and 3uality Management convened 4y the Economic and Social Commission for Asia and the Pacific
-ESCAP9, Asian re&resentatives a&&roved a declaration "hich called for national and international action to assess loss of economic
o&&ortunity due to "ater &ollution and to determine the &otential economic im&acts of the Wlooming "ater crisisW# Interestingly, the
concern of the delegates to the ESCAP meeting "as to demonstrate the economic rather than sim&ly the environmental im&acts of
"ater &ollution on sustaina4le develo&ment# Credit"orthiness -Matthe"s, '8819 is of concern insofar as lending institutions no"
loo% at the cost of remediation relative to the economic gains# *here is concern that if the cost of remediation eceeds economic
4enefits, develo&ment &roAects may no longer 4e credit"orthy# Sustaina4le agriculture "ill, inevita4ly, 4e re=uired to factor into its
"ater resource &lanning the larger issues of sustaina4le economic develo&ment across economic sectors# *his com&rehensive
a&&roach to management of "ater resources has 4een highlighted in the !orld ;an%Is -'8819 &olicy on "ater resource develo&ment#
<lder chlorinated agricultural &esticides have 4een im&licated in a variety of human health issues and as causing significant and
"ides&read ecosystem dysfunction through their toic effects on organisms# Fenerally 4anned in the develo&ed countries, there is
no" a concerted international effort to 4an these "orld"ide as &art of a &rotocol for Persistent <rganic Pollutants -P<Ps9# <ne
eam&le of such an effort "as the Intergovernmental Conference on the Protection of the Marine Environment from Band?4ased
Activities, convened in !ashington DC in '88/ Aointly "ith UNEP -more information is included in Cha&ter /9#
T$e collapse of &'(' agriculture turns every impact and ma"es extinction
inevitable
4ugar, = O U#S# Senator O Indiana, ;eta *heta Pi from Denison University, )hodes Scholar at
Pem4ro%e College ? ;achelor and MasterIs degrees, U#S# Navy Bieutenantn -)ichard, 2Plant
Po"er5 <ur Planet v# 'J n# 1, htt&600"""#une&#org0<urPlanet0imgversn0'J10lugar#html9
In a "orld confronted 4y glo4al terrorism, turmoil in the Middle East, 4urgeoning nuclear
threats and other crises, it is easy to lose sight of the long?range challenges# ;ut "e do so at our
&eril# <ne of the most daunting of them is meeting the "orld>s need for food and energy in this
century# At sta%e is not only &reventing starvation and saving the environment, 4ut also "orld
&eace and security # $istory tells us that states may go to "ar over access to resources, and that
&overty and famine have often 4red fanaticism and terrorism# !or%ing to feed the "orld "ill
minimi@e factors that contri4ute to glo4al insta4ility and the &roliferation of "ea&ons of mass
destruction# !ith the "orld &o&ulation e&ected to gro" from R 4illion &eo&le today to 8 4illion 4y mid?century, the demand for
afforda4le food "ill increase "ell 4eyond current international &roduction levels# Peo&le in ra&idly develo&ing nations "ill have the
means greatly to im&rove their standard of living and caloric inta%e# Inevita4ly, that means eating more meat# *his "ill raise demand
for feed grain at the same time that the gro"ing "orld &o&ulation "ill need vastly more 4asic food to eat# Com&licating a solution to
this &ro4lem is a dynamic that must 4e 4etter understood in the !est6 develo&ing countries often use limited ara4le land to e&and
cities to house their gro"ing &o&ulations# As good land disa&&ears, &eo&le destroy tim4er resources and even rainforests as they try
to create more ara4le land to feed themselves# *he long?term environmental conse=uences could 4e disastrous for the entire glo4e#
Productivity revolution *o meet the e&ected demand for food over the net /D years, "e in the United States "ill have to gro"
roughly three times more food on the land "e have# *hat>s a tall order# My farm in Marion County, Indiana, for eam&le, yields on
average H#1 to H#R tonnes of corn &er hectare O ty&ical for a farm in central Indiana# *o tri&le our &roduction 4y 7D/D, "e "ill have
to &roduce an annual average of 7/ tonnes &er hectare# Can "e &ossi4ly 4oost out&ut that muchU !ell, it>s 4een done 4efore#
Advances in the use of fertili@er and "ater, im&roved machinery and 4etter tilling techni=ues com4ined to generate a threefold
increase in yields since '81/ O on our farm 4ac% then, my dad &roduced 7#H to 1 tonnes &er hectare# Much US agriculture has seen
similar increases# ;ut of course there is no guarantee that "e can achieve those results again# Fiven the urgency of
e&anding food &roduction to meet "orld demand, "e must invest much more in scientific
research and target that money to"ard &roAects that &romise to have significant national and
glo4al im&act# Cor the United States, that "ill mean a maAor shift in the "ay "e conduct and fund agricultural science#
Cundamental research "ill generate the innovations that "ill 4e necessary to feed the "orld# *he
United States can ta%e a leading &osition in a &roductivity revolution# And our success at
increasing food &roduction may &lay a decisive humanitarian role in the survival of 4illions of
&eo&le and the health of our &lanet #
warming impact
+auses warming
5ec", 9 -.ohn Pec%, ''0J0(, 2*he *hreat of Agrofuels Industriali@ed FM< Monocultures !ill
<nly $urt Carmers in Agrofuels5, htt&600"""#n"rage#org0content0threat?agrofuels?
industriali@ed?gmo?monocultures?"ill?only?hurt?farmers900EM
A recent study in the .ournal of Atmos&heric Chemistry and Physics has also made the startling assertion that 4urning
agrofuels may actually contri4ute more to glo4al "arming than 4urning &etroleum# As re&orted
in the *imes -U#K#9 on Se&t# 77, 7DD(, the 4urning of 4iodiesel from corn and canola actually generates /D[ and (D[
more greenhouse gas emissions, res&ectively, than the fossil fuel they "ould re&lace# *his is 4ecause
agrofuel com4ustion generates more nitrous oide "hich is 78R times more damaging as a greenhouse
gas than car4on dioide# Scientists admitted that this initial finding does not even ta%e into account the adverse climate
im&act of the fossil fuels e&ended to &roduce agrofuels in the first &lace# Using these figures, Dr# Dave )eay of the University of
Edin4urgh estimated that if corn?4ased ethanol out&ut clim4s seven fold 4y 7D77, a &ro&osal no" 4eing &ushed in
Congress, then greenhouse gas emissions from the U#S# trans&ort sector alone "ould rise 4y R[# Bi%e the melting
of arctic &ermafrost, human?induced drainage of &eatlands in southeast Asia for agrofuel &alm oil
&lantations "ill also have a huge im&act on glo4al "arming#
ogallala im&act
.epletes t$e 0gallala A!uifer
5ec", 9 -.ohn Pec%, ''0J0(, 2*he *hreat of Agrofuels Industriali@ed FM< Monocultures !ill
<nly $urt Carmers in Agrofuels5, htt&600"""#n"rage#org0content0threat?agrofuels?
industriali@ed?gmo?monocultures?"ill?only?hurt?farmers900EM
Another recent re&ort from the non&rofit grou& Environmental Defense and covered 4y )euters in a 807D0D( article, "arns that
ethanol &lant e&ansion in the Mid"est could also Aeo&ardi@e d"indling "ater su&&lies# In &articular,
the <gallala a=uifer, an HDD?mile?long underground sea that stretches from *eas to South Da%ota and su&&lies one
fifth of all irrigated cro&land in the U#S# could 4e drained of an additional 7#R 4illion gallons &er
year 4y ethanol &roduction# It ta%es u& to si gallons of "ater to &roduce one gallon of ethanol, "ith another '1 gallons of
"ater lost as "aste on average# *he e&anded corn acreage to su&&ly a 4ooming ethanol mar%et "ould re=uire an estimated '7D
4illion gallons of etra irrigation "ater &er year# *here are '17 ethanol &lants already in o&eration in the U#S# "ith (8 more under
construction ? most &ro&osed for the Mid"est#
0gallala a!uifier is on t$e brin" rig$t now
5ew 1 P2Putting Meat on the *a4le6 Industrial Carm Animal Production in America,5 A
ProAect of *he Pe" Charita4le *rusts and .ohns $o&%ins ;loom4erg School of Pu4lic $ealth,
"""#&e"trusts#org0u&loadedCiles0"""&e"trustsorg0)e&orts0IndustrialTAgriculture0PCICAP
TCINAB#&df, &g# 7(Q
Bi%e other as&ects of ifa& -such as manure dis&osal9, cro& &roduction for animal feed
&laces enormous demand on "ater resources6 H([ of the use of fresh"ater in the US
is used in agriculture, &rimarily irrigation C5imentel et al', 1EE9@' ,or example, it ta%es nearly J7D
gallons of "ater to &roduce one &ound of grain?fed 4roiler chic%en C5imentel et al', 1EE9@' ifap
o&erations in arid or semiarid regions are thus of &articular concern 4ecause of their
high "ater demand on the limited su&&ly of "ater, much of it from a=uifers that may
have limited recharge ca&acity# *he '(J,DDD?s=uare?mile <gallala a=uifer, for example, is a
fossil a!uifer t$at dates bac" to t$e last ice age and underlies parts of /ebras"a, Hansas, +olorado, 0"la$oma, /ew Mexico, and Texas'
Irrigation has reduced the <gallala 4y more than half, and current depletion rates exceed 3'3 feet per year
of water table level CMcMic$ael, 1EE3R (oule and 5iper, 1EE)@' ;ecause the a=uifer>s very slo" recharge rate is
vastly outstri&&ed 4y irrigation and other human needs, the a=uifer is at ris% of
4eing fully de&leted, threatening not only agriculture 4ut drin%ing "ater su&&lies for
a huge area of the & nited States'
+ollapse of t$e a!uifier causes a global food crisis 3 nobody can fill in
Billiers 1 PMar=, veteran Aournalist, maga@ine editor and "riter, "ho has "or%ed as a
foreign corres&ondent in Mosco", South Africa, and other &laces, !ater6 *he Cate of
<ur Most Precious )esource, Pg 'R'?'R7Q
*he &ro4lem, though, is that the 4an%ru&ting of agriculture in the region "ill affect more than a fe"
farmers, or even a fe" states# Irrigation has made this second?rate farmland one of the "orldIs 4read4as%ets# A significant
&ro&ortion of American grain e&orts come from the <gallala states, and almost half of
AmericaIs 4eef# If, as is "idely e&ected, ChinaIs "ater crisis drives it to the "orld mar%et for
grain, and if that increasing demand occurs "hen either the <gallala A=uifer is
ehausted or "ater 4ecomes too e&ensive to &um&, that could &reci&itate a glo4al
food crisis# No one ? not Argentina, Canada, or Australia? "ould 4e a4le to &roduce enough to ma%e u&
the shortfall# <f course, the future is unreada4le and forecasting the future a game for the foolhardy, 4ut itIs easy to see that a
calamity could &ossi4ly follo"# ItIs the human and &olitical? the geo&olitical? conse=uences that constitute "aterIs most &otent crisis#
American agriculture failure triggers mass deat$ globally
(ircus 12 -Mar%, director of agriculture ne"s, 2agricultural a&ocaly&se 7D'D,5 htt&600agriculture#imva#info0food?
&rices0agricultural?a&ocaly&se?7D'D9.CS
T$e world faces 8mass starvationD following North America6s next maAor crop failure# And it
could even $appen before year6s end# So says Chicago?4ased Don Coe, "ho is one of the "orld>s leading e&erts
on agricultural commodities, so much so that Canada>s reno"ned ;M< Cinancial Frou& named the fund after him# A crop
failure in North America will $ave &articularly dire conse!uences for ma;or overseas mar"ets
t$at are $ig$ly reliant on &'(' crop imports# Scientists in England are "arning that a 8perfect stormD
of food s$ortages and "ater scarcity no" t$reatens to unleas$ public unrest and conflict, the
government>s chief scientist, Professor .ohn ;eddington, has "arned#PiQ 2Peo&le do not =uite realise the scale of the issue,5 said
Professor Mi%e ;evan# 2T$is is one of t$e most serious problems that science has ever faced#5 In ;ritain
t$e lives of $undreds of t$ousands of people will be t$reatened by food s$ortages' T$e
repercussions of food s$ortages for any society are devastating' T$e world faces 8mass
starvationD following more ma;or crop failures in t$e &nited (tates and other &laces around the
glo4e# According to Chicago?4ased Don Coe, "ho is one of the "orld>s leading e&erts on agricultural commodities, so much so
that Canada>s reno"ned ;M< Cinancial Frou& named the fund after him, this mind 4oggling event could ha&&en 4efore year>s
end# We are facing a problem t$at literally $as never been faced in $uman $istory# Surging
&o&ulation and food demand, food inflation, diminishing "orld food stoc%s, drought, flooding, cold, diminished credit,
infestations, soil erosion, industrial farming, factory farm &ollution, a=uifers0"ells going dry, relocation of &roduce for energy
&roduction are all slamming into a glo4al financial and economic crisis# And in some &laces li%e the United States they don>t
have enough farmers# *hen on to& of everything else "e have desertification, "hich is one of the "orld>s most &ressing
environmental issues# Ne" deserts are gro"ing at a rate of 7D,DDD s=uare miles -/',HDD s=uare %ilometers9 a year#
Desertification leads to famine, mass starvation and human migration# According to Eric de Car4onnel, 2T$ere is
overw$elming, undeniable evidence t$at t$e world will run out of food net year# T$e 7D'D
,ood +risis is going to be different# %t is t$e crisis t$at will ma"e all doomsday scenarios
come true# Early in 7DD8, the su&&ly and demand in agricultural mar%ets "ent 4adly out of 4alance# *he "orld e&erienced
a catastro&hic fall in food &roduction as a result of the financial crisis -lo" commodity &rices and lac% of credit9 and adverse
"eather on a glo4al scale# Normally food &rices should have already shot higher months ago, leading to lo"er food consum&tion
and 4ringing the glo4al food su&&ly0demand situation 4ac% into 4alance# *his never ha&&ened 4ecause the United States
De&artment of Agriculture -USDA9, instead of adAusting &roduction estimates do"n to reflect decreased &roduction, adAusted
estimates u&"ards to match increasing demand from china# In this "ay, the USDA has 4rought su&&ly and demand 4ac% into
4alance -on &a&er9 and tem&orarily delayed a rise in food &rices 4y ensuring a catastro&he in 7D'D#5PiiQ According to the United
States De&artment of Agriculture U#S# farmers &roduced the largest corn and soy4ean cro&s on record in 7DD8# And there are
&eo&le "ho 4elieve that anyone "ho 4elieves government figures on anything concerning the economy or anything else is a total
moron# Xery fe" &eo&le in the US have given any serious consideration to the =uestion of food security# *his essay should
convince &eo&le that its time to start# Cor the most &art, "e>re not a"are of the &ro4lem 4ut if "e loo% hard at the Nhidden> ne"s
"e see that the hand"riting is on the "all for an unimagina4le crisis that "ill come on us as early as this year# More than 7#'
million hectares of grain have 4een destroyed 4y drought in 7DD8 in )ussia, Agriculture Minister :elena S%rynni% said# A total of
R'R,DDD hectares have 4een destroyed in the region, or (D[ of the total amount &lanted#PiiiQ 2T$e world is blissfully
unaware t$at t$e greatest economic, financial and &olitical crisis ever is a few mont$s away# It ta%es
only the tiniest 4it of research to reali@e somet$ing is going critically wrong in the agricultural mar%et# All
someone needs to do to %no" the "orld is headed for food crisis is to sto& reading USDA>s cro& re&orts &redicting a record
soy4ean and corn harvests and listen to "hat else the USDA is saying#
Cood crises cause nuclear "ar
Cri44 'D -.ulian, .ulian Cri44 is a science communicator, Aournalist and editor of several ne"s&a&ers and 4oo%s# $is &u4lished "or% includes
over (,DDD ne"s&a&er articles, ',DDD 4roadcasts, and three 4oo%s and has received 17 a"ards for science, medical, agricultural and 4usiness
Aournalism# $e "as Director, National A"areness, for AustraliaIs science agency, CSI)<, foundation &resident of the Australian Science
Communicators, and originated the CFIA)Is Cuture $arvest strategy# $e has "or%ed as a ne"s&a&er editor, science editor for W*he Australian Wand
head of &u4lic affairs for CSI)<# $e runs his o"n science communication consultancy, 2*he coming famine6 the glo4al food crisis and "hat "e can do
to avoid it,5 &# 7R9
*his is the most li%ely means 4y "hich the coming famine "ill affect all citi@ens of Earth, 4oth through the direct
conse=uences of refugee floods for receiving countries and through the effect on glo4al food &rices and the cost to
&u4lic revenues of redressing the &ro4lem# Cou&led "ith this is the ris% of "ars 4rea%ing out over local
dis&utes a4out food, land, and "ater and the dangers that the maAor military &o"ers may 4e suc%ed into
these vortices, that smaller nations ne"ly nuclear?armed may 4ecome em4roiled, and that shoc%
"aves &ro&agated 4y these conflicts "ill Aar the glo4al economy and disru&t trade, sending
food &rices into a fresh s&iral# Indeed, an increasingly credi4le scenario for !orld !ar III is not so
much a confrontation of su&er&o"ers and their allies as a festering, self?&er&etuating chain of resource conflicts driven
4y the "idening ga& 4et"een food and energy su&&lies and &eo&lesI need to secure them#
d#rule
Watson 99 -)ichard, Professor of Philoso&hy c !ashington U, !orld $unger and Moral <4ligation, &# ''H?''89.CS
*hese arguments are morally s&urious# *hat food sufficient for "ell?nourished survival is the e=ual right of every human individual
or nation is a s&ecification of the higher &rinci&le that everyone has e=ual right to the necessities of life# *he moral stress of the
&rinci&le of e=uity is &rimarily on e=ual sharing, and only secondarily on "hat is 4eing shared# *he higher moral &rinci&le is of
human equity per se# Conse=uently, t$e moral action is to distribute all food e!ually, w$atever
t$e conse!uences' T$is is t$e $ard line a&&arently dra"n 4y such moralists as Immanuel Kant and Noam
Choms%yEbut t$en, morality is $ard' T$e conclusion may be unreasona4le -impractical and
irrational in conventional terms9, but it is obviously moral# Nor should anyone &ur&ort sur&riseG it has al"ays
4een understood that the claims of moralityEif ta%en seriouslyEsupersede t$ose of conflicting
reason' 0ne may even $ave to sacrifice one6s life or one6s nation to be moral in
situations w$ere practical be$avior would preserve it# Cor eam&le, if a &risoner of "ar undergoing
torture is to 4e a -&erha&s dead9 &atriot even "hen reason tells him that colla4oration "ill hurt no one, he remains silent# Similarly,
if one is to 4e moral, one distributes available food in e!ual s$ares Ceven if everyone t$en
dies9# *hat an action is necessary to save one>s life is no ecuse for 4ehaving un&atriotically or immorally if one "ishes to 4e a
&atriot or moral# No &rinci&le of morality a4solves one of 4ehaving immorally sim&ly to save one>s life or nation# *here is a strict
analogy here 4et"een adhering to moral &rinci&les for the sa%e of 4eing moral, and adhering to Christian &rinci&les for the sa%e of
4eing Christian# T$e moral world contains pits and lions, 4ut one loo%s al"ays to the highest light# T$e
ultimate test always $ar"s to t$e $ig$est principleGrecant or dieGand it is pat$etic
to profess morality if one !uits w$en t$e going gets roug$' % $ave put aside many
!uestions of detailGsuc$ as t$e mec$anical problems of distributing foodG
because detail does not alter t$e star" conclusion' %f every $uman life is e!ual in
value, t$en t$e e!ual distribution of t$e necessities of life is an etremely high, if not t$e
$ig$est, moral duty# It is at least high enough to override the ecuse that 4y doing it one "ould lose one>s life# ;ut
many people cannot accept t$e view that one must distri4ute e=ually even in f the nation colla&ses or all &eo&le
die# %f everyone dies, t$en t$ere will be no realm of morality# Practically s&ea%ing, sheer survival
comes first# <ne can adhere to the &rinci&le of e=uity only if one eists# (o it is rational to suppose t$at t$e
principle of survival is morally $ig$er t$an t$e principle of e!uity# And though one might
not 4e a4le to argue for une=ual distri4ution of food to save a nationEfor nations can come and goEone might "ell argue that
une=ual distri4ution is necessary for the survival of the human s&ecies# *hat is, some large grou&Esay one?third of &resent "orld
&o&ulationEshould 4e at least "ell?nourished for human survival# *owever, from an individual standpoint,
t$e $uman speciesEli%e the nationEis of no moral relevance# Crom a naturalistic stand&oint, survival
does come firstG from a moralistic standpointEas indicated a4oveEsurvival may $ave to be
sacrificed' %n t$e milieu of morality, it is immaterial w$et$er or not t$e $uman
species survives as a result of individual 4ehavior#
ama:on impact
.estroys t$e Ama:on
5ec", 9 -.ohn Pec%, ''0J0(, 2*he *hreat of Agrofuels Industriali@ed FM< Monocultures !ill
<nly $urt Carmers in Agrofuels5, htt&600"""#n"rage#org0content0threat?agrofuels?
industriali@ed?gmo?monocultures?"ill?only?hurt?farmers900EM
Mean"hile, the destruction and conversion of tro&ical rainforests for e&ort oriented agrofuel
monocultures continues a&ace# )o4ert Carley, Monsanto Xice President, s&ea%ing at an agrofuel e&o in Argentina on
March '/, 7DD( admitted that the 4oom "ould 4e Wunimagina4le in terms of "hat itIs going to mean for
corn and soy4ean surface areaW# *he real "inner, though, could 4e more tro&ical cro&s li%e sugar and &alm oil# Cor
instance, ;ra@il already has R million hectares devoted to agrofuels and &lans to increase its sugar cane acreage alone 4y five fold to
1D million hectares to meet ethanol e&ort demands# In 7DD/ .a&anese oil giant, Ni&&on, signed a Aoint venture deal "ith Petro4ras
to shi& out '#H 4illion liters of ethanol &er year# Clush "ith all sorts of s&eculative ca&ital -over V8 4illion in 7DDR alone9, merger
mania is no" s"ee&ing ;ra@ilIs sugarcane and ethanol sector# Eduardo Pereira de Carvalho, the &resident of the Sao
Paulo Sugar Cane Manufacturers Union, &redicts that a third of the countryIs &asture "ill soon 4e
converted to sugar, leading the tim4er magnates and cattle 4arons to drive dee&er into the
Ama@on#
Ama:on destruction ensures extinction
Ta"acs EP -David, *$E IDEA <C DIXE)SI*:6 P$IB<S<P$IES <C PA)ADISE, &g# 7DD?7D'9
So biodiversity %ee&s the "orld running # It has value and of itself, as "ell as for us# )aven, Er"in, and !ilson o4lige
us to thin% a4out the value of 4iodiversity for our o"n lives# *he Ehrlichs> rivet?&o&&er tro&e ma%es this same &ointG 4y
eliminating rivets, "e &lay )ussian roulette "ith glo4al ecology and human futures6 2It is li%ely that
destruction of the rich com&le of s&ecies in the Ama@on 4asin could trigger ra&id changes in glo4al
climate &atterns# Agriculture remains heavily de&endent on sta4le climate, and human 4eings remain
heavily de&endent on food# ;y the end of the century the etinction of &erha&s a million s&ecies in the Ama@on 4asin
could have entrained famines in "hich a 4illion human 4eings &er ished # And if our s&ecies is very unluc%y,
the famines could lead to a thermonuclear "ar, "hich could etinguish civili@ation #5 Else"here
Ehrlich uses different &articulars "ith no less drama6 !hat then "ill ha&&en if the current decimation of organic diversity
continuesU Cro& yields "ill 4e more difficult to maintain in the face of climatic change, soil erosion, loss
of de&enda4le "ater su&&lies, decline of &ollinators, and ever more serious assaults 4y &ests# Conversion of &roductive land to
"asteland "ill accelerateG deserts "ill continue their seemingly ineora4le e&ansion# Air &ollution "ill increase, and local climates
"ill 4ecome harsher# $umanity "ill have to forgo many of the direct economic 4enefits it might have "ithdra"n
from EarthIs "ellistoc%ed genetic li4rary# It might, for eam&le, miss out on a cure for cancerG 4ut that "ill ma%e little difference# As
ecosystem services falter, mortality from res&iratory and e&idemic disease, natural disasters, and es&ecially famine "ill
lo"er life e&ectancies to the &oint "here canicer -largely a disease of the elderly9 "ill 4e unim&ortant# *umanity
will bring upon itself conse=uences de&ressingly similar to those e&ected from a nuclear winter# ;arring a
nuclear conflict, it a&&ears that civili@ation "ill disa&&ear some time 4efore the end of the net century ? not
"ith a 4ang 4ut a "him&er#
invasive species impact
+auses invasive species
5ec", 9 -.ohn Pec%, ''0J0(, 2*he *hreat of Agrofuels Industriali@ed FM< Monocultures !ill
<nly $urt Carmers in Agrofuels5, htt&600"""#n"rage#org0content0threat?agrofuels?
industriali@ed?gmo?monocultures?"ill?only?hurt?farmers900EM
Mean"hile, the government of India has targeted ' J million hectares of su&&osed W"astelandW# for
Aatro&ha agrofuel &lantations# .atro&ha is an es&ecially dangerous agrofuel alternative since it is
invasive s&ecies, toic to animals, originally trans&lanted 4y the Portuguese from Central America to Asia and Africa for
living hedgero"s# In Ethio&ia, a Ferman firm attem&ted to &urchase '1,DDD hectares for a similar Aatro&ha &roAect, a&&arently
una"are that most of this land fell "ithin an ele&hant sanctuary# In Uganda, grassroots activists are no" fighting government efforts
to sell off &rotected areas in the Ma4ira Corest and on ;ugulu Island to agrofuel s&eculators# And in the )e&u4lic of the Congo, a
RH,DDD hectare eucaly&tus &lantation "as recently ac=uired 4y a Canadian com&any, MagIndustries, "ith the goal of e&orting half
a million tonnes of "oodchi&s to Euro&e for 4iomass 4urning#
xtinction
/adol, EE -Xi%i Nadol, .D Candidate c Xal&araiso, Summer '888, North"estern School of
Ba" of Be"is _ Clar% College, & ln9
T$e t$reat of invasion 4y nonnative s&ecies $as always existed' It is argua4ly a natural &rocess that should
4e allo"ed to continue unheeded# n7' *he &ro4lem "ith t$is theory is that it fails to ta"e into account t$e rate
at w$ic$ $umans are responsible for accelerating t$e pace of successful introductions, as
com&ared to those that "ould occur naturally# n77 *he last five hundred years or so demarcate an era of human e&ansion that has
resulted in the increasingly ra&id disru&tion and wea"ening of art$Is eco systems# n71 T$e fragile
condition of t$ese systems renders t$em vulnerable to t$e establis$ment of
invasive species# n7J In addition, rates of introduc P*1J1Q tion have escalated "ith the advent of ne" modes of conveyance
4y trade and travel# n7/ Air&lanes, 4oats, and automo4iles &rovide sufficiently =uic% and s&acious travel, facilitating entry of a
num4er of invasive s&ecies into ha4itat @ones other"ise out of reach# n7R In the late '8/Ds, Charles Elton, a reno"ned ;ritish
ecologist, "arned that modern society "as "itnessing great historical dislocations of the "orldIs fauna and flora# n7( Indeed, the
sco&e of invasion is alarming, as are its effects# n7H <ver J/DD invasive species are no" esta4lished in the United States#
n78 *hese s&ecies greatly t$reaten biological diversity n1D 4ecause t$ey are often able to out#
compete and displace native organisms' n1' As "ould 4e e&ected, t$ey also add to t$e stress
already suffered by endangered and threatened native species# n17 <ne study indicates that invasive s&ecies are
second only to ha4itat destruction among the leading causes of s&ecies loss nation"ide# n11 $o"ever, some e&erts fear that
invasive species ultimately will contribute to t$e demise of t$e $uman population
by destroying natural processes and ecosystems necessary to $uman survival# n1J j
****o Cootnotes***j n1D# See infra note 1/ and accom&anying tet# %n addition to t$reatening diversity,
invasive species ultimately t$reaten survival of species as wellA As t$e total number
of species declines, plants and animals t$at may be important food resources, t$at
play a critical role in t$e food web, or t$at contain medicinal !ualities may
disappear' (urviving species will $ave fewer buffers against catastrop$ic
fluctuations in t$e environment# If, for eam&le, a fish s&ecies loses many or some of its food resources, any
threat or damage to the remaining food resource can 4e far more detrimental to the fish 4ecause alternatives have 4een lost# *hus
homogeni@ation of ha4itats and s&ecies can have far?reaching effects# ;reaching Natural ;arriers, su&ra note 77, at H# n1'#
3uammen, su&ra note 7/, at RR# As one s&ecialist e&lains, invasive s&ecies outgro", out?mature, and sim&ly out?com&ete native
s&ecies# *ele&hone Intervie" "ith Neil )ichmond, Shellfish Cishery ;iologist, <regon De&It of Cish _ !ildlife -Nov# 7/, '88H9
Phereinafter )ichmond Intervie"Q# n17# 3uammen, su&ra note 7/, at RR -WPAQ re&ort, from the U#N# Environmental Program,
declares that almost 7D &ercent of the "orldIs endangered verte4rates suffer from &ressures -com&etition, &redation, ha4itat
transformation9 created 4y eotic interlo&ers#W9# n11# !estley et al#, su&ra note R, at JR# n1J# See 3uammen, su&ra note 7/, at RH#
!e come to a certain fretful lea& of logic that other"ise thoughtful o4servers seem "illing, even eager, to ma%e6 that t$e
ultimate conse=uence "ill 4e the etinction of us # ;y sei@ing such a huge share of EarthIs landsca&e, 4y im&osing
so "antonly on its &rovidence and &resuming so rec%lessly on its forgivingness, by "illing off so many species, they
say, we will doom our own species to extinction' j
)ac nat gas $ydrates
Massive amounts of natural gas in t$e gulfGalso solves gas $ydrates researc$
(cience .aily, E -Science Daily, R0'08, 2Significant Fas )esource Discovered In Fulf <f
Meico5, htt&600"""#sciencedaily#com0releases07DD80D/0D8D/1''DDH'8#htm900EM
)ecent drilling 4y a government and industry consortium confirm that the Fulf of Meico is the
first offshore area in the United States "ith enough information to identify gas hydrate energy resource
targets "ith &otential for gas &roduction# Fas hydrate, a su4stance com&rised of natural gas and "ater, is
thought to eist in great a4undance in nature and has the &otential to 4e a significant ne" energy
source to meet future energy needs# $o"ever, &rior to this e&edition, there "as little documentation that gas hydrate
occurred in resource?=uality accumulations in the marine environment# 2*his is an eciting discovery 4ecause for the first
time in the U#S# Fulf of Meico, "e "ere a4le to &redict hydrate accumulations 4efore drilling, and "e discovered thic%, gas hydrate?
saturated sands that actually re&resent energy targets,5 said U#S# Feological Survey Energy Program Coordinator ;renda Pierce# *he
U#S# De&artment of Energy -D<E9, the U#S# Feological Survey -USFS9, U#S# Minerals Management Service -MMS9 and a grou& of
U#S# and international energy industry com&anies under the management of Chevron "ere res&onsi4le for conducting this first ever
drilling &roAect "ith the goal to collect geologic data on gas?hydrate?4earing sand reservoirs in the Fulf of Meico# 2!e have
also found gas hydrate in a range of settings, including sand reservoirs, thic% se=uences of
fracture?filling gas hydrates in shales, and &otential &artially saturated gas hydrates in younger
systems,5 said USFS Scientist *imothy Collett# 2*hese sites should &rovide a "ealth of o&&ortunities for
further study and data collection that should &rovide significant advances in understanding the
nature and develo&ment of gas hydrate systems#5
/atural gas $ydrates solve extinction
Ma"ogon et al, S De&artment of Petroleum Engineering at *eas A _ M University-:#C#
Ma%ogon, S#A# $olditch, and *#:# Ma%ogon, 'D010/, 2Natural gas?hydrates E A &otential energy
source for the 7'st Century5,
htt&600research#nigc#ir0files0infoTres0articles0HRD7/agTr'1#&df900EM
*he history of humanity is characteri@ed 4y com&etition for the living s&ace on our small &lanet#
*he &ast century has 4een one of high &o&ulation and energy consum&tion gro"th # <ver the &ast
hundred years, the &o&ulation on Earth gre" four?fold, eceeding R#7 4illion, "hile the energy consum&tion
gre" 4y over an order of magnitude, from D#8k'D8 tons of oil e=uivalent -*<E9 to '#D7k'D'D *<E -;P, 7DD/9# T$e
rate of modern civili:ation gro"th in the future "ill de&end on numerous factors, 4ut t$e !uality
and !uantity of energy used "ill 4e among the most im&ortant factors# *he data &resented in Cig# ' reflect the
distri4ution and changes of energy sources over time# Currently, oil and natural gas are the &rimary fuels# $o"ever, the data in Cig#
7 sho" that the &ast century should 4e named the century of 4ituminous coal rather than oil or gas# *he cumulative role of nuclear
and hydroelectric &o"er has not eceeded 'D[# According to the United Nations, the &otential energy resources of uranium on earth
do not eceed J#/[ of the resources from oil, gas and coal# Cor the foreseea4le future, oil, gas and coal "ill 4e the &rimary sources of
energy# According to ;P -7DD/9, as of ' .anuary 7DD/, the &roven hydrocar4on reserves are 'R'#8 4illion tons of oil and '(8#/ trillion
m1 of natural gas# At the current level of consum&tion, the reserves are sufficient for J' yr for oil and RR yr for natural gas# *he
standard of living of individual countries in the modern "orld is determined in &art 4y their location and s&ecific levels of the energy
consum&tion# *he =uality of life in each country is determined not 4y the reserves of the energy resources it has, 4ut 4y the
consum&tion of energy 4y each of its inha4itants# !hile the levels of energy consum&tion may have 4een similar in different
countries over 7DD yr ago, in the modern "orld the ga& in energy consum&tion 4et"een individual countries has reached an order of
magnitude or more# Cor eam&le, although a4out /[ of the "orldIs &o&ulation lives in the USA, the country consumes 77[ of the
"orldIs energy and &roduces much of the "orldIs FDP# At the same time, the &o&ulation of India accounts for a4out 7D[ of the
"orld &o&ulation, 4ut its energy consum&tion does not eceed 1#7[# *he energy consum&tion &er &erson in the USA is 1D times as
high as in India# Each inha4itant in China uses '0'D the energy of their counter&arts in the USA# Energy sources can change ra&idly,
de&ending on the level of the develo&ment of civili@ation# *oday, some countries, including .a&an and Korea, im&ort over 8H[ of the
energy they use# Most of the energy used these countries is trans&orted thousands of %ilometers# $o"ever, enormous
&otential resources of natural gas reside in natural hydrates very near .a&an and Korea# *hese de&osits
of natural gas in gas?hydrates are actually found all over the "orld in dee&"ater or in the Arctic# <ver 77D
gas?hydrate de&osits -F$D9 have 4een found in the "orld to date# A ma& of the discovered F$D is sho"n in Cig# 1 -Ma%ogon et al#,
7DDJ9# *he "orldIs &otential amount of natural gas in &lace in hydrates eceeds '/ =uadrillion m1# Commercial &roduction of Aust
'/[ of this gas "ould &rovide the "orld "ith energy for 7DD yr at the current level of energy consum&tion# *he &roduction of natural
gas from hydrates could 4e used to contri4ute not only to sustained economic develo&ment of
individual countries, 4ut also to the political stability of t$e world #
)ac oil clean up
Transboundary agreement solves oil spill cleanupGefforts now are doomed to
failure
Martin* and Wood**, 13 *director of the Energy Program at the Institute of the Americas at
the University of California, San Diego AND **director of the Meico Institute at the !oodro"
!ilson International Center for Scholars# $e "or%ed as a &rofessor for '( years in Meico and
&reviously "as director of the International )elations Program at the Instituto *ecnol+gico
Aut+nomo de M,ico -.eremy Martin, , /010'1, 2U#S# Should Act 3uic%ly on *rans4oundary
$ydrocar4on Agreement !ith Meico5,
htt&600"""#"orld&oliticsrevie"#com0articles0&rint0'7871900EM
Second, this agreement ma%es clear that 4oth nations are %eenly a"are of the energy &otential of the
Fulf, &articularly along the maritime 4order# ;ut it also firmly esta4lishes the issue of increased regulation and
standards for drilling in a 4ilateral agreement# Since the A&ril 7D'D Macondo accident, the largest oil s&ill in U#S# history, the U#S#
has 4een more concerned "ith drilling safety not Aust in the U#S# 4ut also in neigh4oring countries around the Fulf such as Cu4a and
Meico# *his agreement formali:es interaction in terms of regulation and any res&onses to
incidents along the maritime 4order# *hird, then?Secretary of State $illary Clinton "as correct to em&hasi@e the
commercial o&&ortunity and energy security element of the accord "hen it "as first announced# *he agreement &rovides the
&ossi4ility for U#S# firms to Aoin "ith Meico>s national oil com&any , Peme, to e&loit dee&?
"ater oil resources in the Fulf of Meico along the countriesI maritime 4oundaries# *his could &rovide im&ortant
o&&ortunities for U#S# com&anies, including eciting Aoint venture o&&ortunities "ith Peme long thought im&ossi4le#
T*A ensures safe drilling
Martin and Wood 13 O *Director of the Energy Program at the Institute of the Americas at
the University of California, San DiegoG **Director of the Meico Institute at the !oodro"
!ilson International Center for Scholars, &rofessor for '( years in Meico and &reviously "as
director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de
M,ico -I*AM9 in Meico City -.eremy M# and Duncan, 2U#S# ShoUld Act 3Uic%ly on
trAnS4oUndAry hydrocAr4on Agreement !ith meico,5 !orld Politics )evie", May 1, 7D'1,
htt&600"""#iamericas#org0ne"s0!P)TUSTMeicoTD/D17D'1#&df900;"ang
Second, this agreement ma%es clear that 4oth nations are %eenly a"are of the energy &otential of the Fulf, &articularly along
the maritime 4order# ;ut it also firmly esta4lishes the issue of increased regulation and standards for
drilling in a 4ilateral agreement# Since the A&ril 7D'D Macondo accident, the largest oil s&ill in U#S#
history, the U#S# has 4een more concerned "ith drilling safety not Aust in the U#S# 4ut also in
neigh4oring countries around the Fulf such as Cu4a and Meico# *his agreement formali@es
interaction in terms of regulation and any res&onses to incidents along the maritime 4order#
)ac cooperation
T$e plan solves broader +uban, +anadian, and Russian oil cooperation and
liberali:es t$e Mexican oil sector
Melgar, 1) director of the Center for Sustaina4ility and ;usiness at EFADE ;usiness School of
the *ecnol+gico de Monterrey -B<U)DES MEBFA), Summer 7D'7, 2*he Cuture of PEMEL5,
htt&600"""#americas=uarterly#org0node01(H'900EM
Dee&"ater drilling is li%ely to ta%e center stage "ith the signing of the U#S#OMeico *rans4oundary $ydrocar4on
Agreement in Ce4ruary 7D'7# *he agreement, ratified 4y the Meican Senate 4ut still a"aiting a&&roval in
the U#S#, relieves concerns a4out the so?called 2stra"5 effect, in "hich Meican oil is si&&ed a"ay 4y the U#S# as its &roduction
advances closer to the international maritime 4order in the Fulf of Meico# *he agreement &rovides a legal
frame"or% for develo&ment of oil and gas reservoirs that cross the maritime 4order in the Fulf of MeicoEthe
first such &act for 4oth countries# In fact, it is vie"ed as a dress rehearsal for negotiations the U#S# "ill have to
underta%e "ith Canada , )ussia and even Cu4a to address shared reservoir e&loitation#
Im&lementation "ill re=uire legal and institutional adAustments in Meico and in the United States# Since it
re=uires Aoint or coordinated &roduction, the agreement &ossi4ly opens a ne" era of coo&eration
4et"een PEMEL and international oil com&anies# If a trans4oundary field "ere identified, PEMEL "ould have to
"or% "ith field o&erators on the U#S# side# *his ma%es technological a&titude &articularly relevant, since shared reservoirs are more
li%ely to eist in the dee& and ultra?dee& "aters of the Fulf of Meico# Cor sovereignty, energy security and &olitical reasons, Meico
"ill go the etra mile to ensure that its hydrocar4on resources are not lost to its neigh4or# *his gives it a high incentive to develo&
the institutional architectureEincluding strengthening the CN$Eneeded to im&lement the agreement# Identifying and develo&ing a
Aoint reservoir "ould allo" PEMEL to "or% in full &artnershi& "ith com&anies at the cutting edge of ultra?dee&"ater &roduction#
*he e&erience, 4enefits and %no"?ho" that "ould 4e gained may reduce the reluctance to underta%e Aoint &roduction and other
strategic alliances that are 4anned 4y PEMEL 4yla"s# Im&lementation of the treaty could trigger an accelerated transformation of
the regime under "hich dee&"ater resources are e&loited in Meico# Eciting times are in sight# *he incoming administration "ill
4e com&elled to conduct a de4ate on the future of PEMEL, and the issue of constitutional reform "ill have to 4e a full &art of it#
*he Meican oil industry can no longer thrive on amendments to distorted schemes#
ATA 0ffcase
)ac tGgovt to govt
5lan mandates government interaction wit$ mexico 3 our ev uses t$e term of art
Myers et' Al 1)-!illiam C# Danvers, Staff Director Kenneth A# Myers, .r#, Staff Director U#S# F<XE)NMEN* P)IN*INF
<CCICE ((?/R( !AS$INF*<N 6 7D'7 A MIN<)I*: S*ACC )EP<)* P)EPA)ED C<) *$E USE <C *$E C<MMI**EE <N
C<)EIFN )EBA*I<NS UNI*ED S*A*ES SENA*E O;)!9
*he <4ama administration contends that the agreementIs ar4itration mechanism is not intended to
&roduce 4inding decisions, ho"ever, that is not s&ecifically &rovided for in the tet of the
agreement and "ould 4e different from ar4itration mechanisms in many other international
agreements# T$e T-A further contains re!uirements of data sharing and notification of li%ely reserves
4et"een the United States and Meico, o&ening the o&&ortunity for increased government#to#
government collaboration on strategic energy &olicy choices# Meico and the United States are
relatively less advanced in effective communication and lin%ages of our energy systems than "e are in less &olitically?
controversial economic areas# Im&roved ties can im&rove understanding and galvani@e coo&eration in often
une&ected "ays#
)ac plan popular
5lan popular wit$ RepublicansGit will be passed easily
senaro, 13 -Al4erto Esenaro, J0(0'1, 23UICK !$I*E $<USE )ESP<NSE C<UBD MEAN A
C<<* IN *$E D<<) IN MELIC<>S $:D)<CA);<NS SEC*<)5,
htt&600meicanla"4log#com0=uic%?"hite?house?res&onse?could?mean?a?foot?in?the?door?in?
meicos?hydrocar4ons?sector0900EM
In A&ril of 7D'7, then Secretary of State $illary Clinton made an agreement "ith former &resident Celi&e Calder+n allo"ing Aoint oil
e&loration in the Fulf of Meico, "hich "ould give the U#S# access to Meico>s "ell?%no"n oil riches# Interestingly, "hile the deal
"as a&&roved "ith lightning s&eed in the Meican Senate -"here o&&osition to &rivati@ation is =uite strong9, the current <4ama
administration in the United States has delayed finali@ing the off?shore drilling deal# According to )e&u4lican
la"ma%ers and industry e&erts, a =uic% res&onse is essential and foot?dragging could have disastrous
conse=uences for Americans interested in accessing Meican oil# *he reason "hy conse=uences could 4e disastrous according to
industry e&erts is that Meico could very easily change its mind and call off the deal6 &u4lic o&inion on any foreign investment in
the country>s hydrocar4ons sector generally tends to 4e negative and &oliticians could very "ell su4mit to the "ill of the &o&ulace#
)e&# .eff Duncan -)?S#C#9 s&o%e to *he $ill recently after a $ouse Coreign )elations committee hearing# S&ea%ing a4out
energy deals "ith Meico, he said6 2It>s time for the administration to act# All t$ey $ave to do is send
t$e enacting legislation over $ere and let us act on it, because "e>re sitting on Ngo#>5
T$e plan is bipartisan and 0bama doesn6t pus$
+,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E
*)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*?
''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM
*here is reason to 4elieve that the T-A can receive 4road 4i&artisan 4ac%ing in Congress # It "ould
4enefit 4ilateral relations, &romote domestic oil &roduction, and im&rove environmental
&rotections in the Fulf of Meico# Collo"ing normal Congressional &rocedure to ensure the agreement is vetted and
im&lementing legislation is reasoned "ill 4enefit each of those goals# Eternal &ro&onents of the *;A "ill need to
increase communication and advocacy to im&rove the li%elihood of Congressional leaders acting
on the agreement in the ''1th U#S# Congress#
T-A is popular 3 swings congressional leaders and enables bipart
Myers et' Al 1)-!illiam C# Danvers, Staff Director Kenneth A# Myers, .r#, Staff Director U#S# F<XE)NMEN* P)IN*INF
<CCICE ((?/R( !AS$INF*<N 6 7D'7 A MIN<)I*: S*ACC )EP<)* P)EPA)ED C<) *$E USE <C *$E C<MMI**EE <N
C<)EIFN )EBA*I<NS UNI*ED S*A*ES SENA*E O;)!9
*here is reason to 4elieve that the T-A can receive broad bipartisan bac"ing in +ongress# It
"ould 4enefit 4ilateral relations, &romote domestic oil &roduction, and im&rove environmental
&rotections in the Fulf of Meico# Collo"ing normal Congressional &rocedure to ensure the
agreement is vetted and im&lementing legislation is reasoned "ill 4enefit each of those goals#
xternal proponents of t$e T-A will need to increase communication and advocacy to
improve t$e li"eli$ood of +ongressional leaders acting on t$e agreement in the ''1th
U#S# Congress# North American Energy Security *he United States and Canada are radically transforming glo4al energy mar%ets#
Unconventional oil and natural gas has led to a renaissance in North American energy &roduction# Alongside continued gro"th in
rene"a4le fuel and &o"er sources and energy efficiency, the continent is &oised to 4e functionally self?sufficient in energy# Meico
should 4e invited to Aoin in the U#S#?Canada driven resurgence# *he im&acts of the North American oil and gas &o"erhouse reach
4eyond energy mar%ets# Bo"?&riced American natural gas is encouraging Ao4 creation, industrial gro"th, and ne" trade
o&&ortunities# Increasing U#S# domestic oil &roduction and trade "ith Canada "ill %ee& more American dollars at home# )egimes
that use their oil and natural gas riches for intimidation and coercion, such as Xene@uela and )ussia, are seeing their &etro?fueled
&o"er eroded# Afforda4le and relia4le energy su&&lies are critical to Ao4 creation and =uality of life for citi@ens of the United States
and for our allies Canada and Meico# North America has long 4een a glo4al leader in energy innovation, &roduction, and mar%et
&romotion# *he geogra&hical &roimity of our industrial and &o&ulation centers "ith our resource 4asins, integrated su&&ly and
trans&ort chains across 4orders, and cultural closeness of our &eo&les has encouraged steadily increasing coordination and
integration of North American energy, trans&ort, and related infrastructure# Maimi@ing the &otential for oil and
natural gas to &romote economic gro"th and security across the continent "ill re=uire continual
im&rovement in &olicy communication, infrastructure rationali@ation, and regulatory harmoni@ation 4et"een the
U#S#, Canada, and Meico# Canada and the U#S# have largely integrated energy systems, 4ut fissures over the Keystone LB &i&eline
a&&roval &rocess is an eam&le of the need for even greater regulatory coordination# Com&aratively, U#S#?Meico energy
coordination and integration is "ell 4ehind# Po"er sector reforms &rom&ted 4y NAC*A demonstrate that a trilateral effort can have
maAor results# Most im&ortantly, "ey leaders from 4oth the P)I and PAN in Meico City are interested in
ma"ing progress#
5lan is bipart
Marex 13 a &rivately?o"ned 4ro%er of financial instruments in the commodities sector and &hysical energy &roducts -2U#S#
$ouse Passes Maritime *rans4oundary Agreement
DuncanIs ;ill <&ens '#/ Million Acres in the Fulf for Energy Production5 .une 7H, 7D'1, leis9 00K:
<n *hursday, Congressman .eff Duncan of South Carolina &raised the $ouse &assage of his 4ill $#)# 'R'1, the <uter Continental
Shelf *rans4oundary $ydrocar4on Agreements Authori@ation Act# Duncan>s legislation &assed the $ouse 4y
a 4i&artisan vote of 7/R?'(', and is one of several energy related 4ills he>s authored since 4eing elected to Congress# *he
4ill "ill allo" the United States and Meico to e&lore and &roduce the resources "hich are shared or
co?o"ned underneath the maritime 4order, &utting in &lace safety and regulatory standards "hich currently a&&ly to offshore
energy &roduction in U#S# Fulf of Meico "aters# 2;y &assing this *rans4oundary Agreement, the $ouse has furthered its
commitment to create Ao4s through energy# *his legislation im&lements a first of its %ind agreement "ith the government of Meico
to develo& shared resources located 4et"een our t"o countries in the Fulf,5 said Duncan# 2*he legislation also o&ens roughly '#/
million acres in the Fulf of Meico for &roduction and "ould hel& create American Ao4s and gro" our economy in the &rocess#
According to the ;ureau of <cean Energy Management and the U#S# State De&artment, these areas are estimated to contain '(7
million 4arrels of oil and 1DJ 4illion cu4ic feet of natural gas, a considera4le amount that "ill lessen our de&endence on Middle
Eastern sources of oil# *he agreement also &rioriti@es safety 4y re=uiring that all o&erations in the region conform to U#S# safety
standards and esta4lishes a frame"or% for &ossi4le future arrangements "ith other neigh4oring countries li%e Canada# Sim&ly &ut,
this legislation is a "in?"in for our country, and I am &roud that it received strong 4i&artisan
su&&ort#5
%t6s popular and s$ould be ratified
Martin and Wood 13 O *Director of the Energy Program at the Institute of the Americas at
the University of California, San DiegoG **Director of the Meico Institute at the !oodro"
!ilson International Center for Scholars, &rofessor for '( years in Meico and &reviously "as
director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de
M,ico -I*AM9 in Meico City -.eremy M# and Duncan, 2U#S# ShoUld Act 3Uic%ly on
trAnS4oUndAry hydrocAr4on Agreement !ith meico,5 !orld Politics )evie", May 1, 7D'1,
htt&600"""#iamericas#org0ne"s0!P)TUSTMeicoTD/D17D'1#&df900;"ang
*hese are all &ositive ste&s, and their &rogress "ill 4e monitored closely 4y U#S# and international o4servers, es&ecially Meico# ;ut
it 4ears underscoring that further delay in U#S# ado&tion of the agreement ma%es little sense# *he
agreement is not an overly &olari@ing issue domestically6 in fact, =uite the o&&osite# Several
la"ma%ers have descri4ed it as a "in?"in for 4oth Meico and the U#S#
As the U#S# Congress de4ates the deal, it is "orth revisiting the four %ey reasons the agreement merits an e&editious a&&roval in the
coming "ee%s#
Cirst, a&&roval of the deal in the U#S# "ould 4e an im&ortant sign of 4ilateral concord, &articularly at the outset of a ne"
administration in Meico and a second term for <4ama# *his is im&ortant, as it underscores the t"o nations> increasing a4ility to
"or% together and conclude com&licated agreementsEand coo&erationEon 4inational issues unrelated to immigration or crime and
drugs#
Second, this agreement ma%es clear that 4oth nations are %eenly a"are of the energy &otential of the Fulf, &articularly along the
maritime 4order# ;ut it also firmly esta4lishes the issue of increased regulation and standards for drilling in a 4ilateral agreement#
Since the A&ril 7D'D Macondo accident, the largest oil s&ill in U#S# history, the U#S# has 4een more concerned "ith drilling safety not
Aust in the U#S# 4ut also in neigh4oring countries around the Fulf such as Cu4a and Meico# *his agreement formali@es interaction in
terms of regulation and any res&onses to incidents along the maritime 4order#
*hird, then?Secretary of State $illary Clinton "as correct to em&hasi@e the commercial o&&ortunity and energy security element of
the accord "hen it "as first announced# *he agreement &rovides the &ossi4ility for U#S# firms to Aoin "ith Meico>s national oil
com&any, Peme, to e&loit dee&?"ater oil resources in the Fulf of Meico along the countries> maritime 4oundaries# *his could
&rovide im&ortant o&&ortunities for U#S# com&anies, including eciting Aoint venture o&&ortunities "ith Peme long thought
im&ossi4le#
Cinally, the agreement is relevant and "orthy of attention in 4oth the U#S# and Meico 4ecause of the im&ortant role of Meican oil
in the U#S# energy security e=uation, and the im&ortance of the U#S# mar%et for Meican oil e&orts and revenue#
During her remar%s at the signing ceremony, Clinton called the agreement &art of a commitment to im&rove energy security for 4oth
countries and to ensure safe, efficient, res&onsi4le e&loration of the oil and gas reservoirs in the Fulf of Meico#
*his last &oint has echoed throughout the congressional hearings on the to&ic, "hile mem4ers of Congress from 4oth &arties and
from across the country have focused on the im&ortance of colla4oration "ith our neigh4ors, shared technology and the o&&ortunity
to 4oost energy security on 4oth sides of the 4order#
*he &resident>s visit to Meico and the accom&anying surge in interest in the agreement &rovide the necessary momentum to
facilitate &assage of the 4ill and ta%e the critical first ste&s to"ard im&lementation#
!aiting any longer to do so merely delays the many 4enefits the agreement has to offer and
sends the "rong signal a4out the need for the U#S# and Meico to "or% together in the Fulf of
Meico, and on energy issues more generally# l
T*A passed t$e $ouse, is pus$ed by .uncan and is popular
Traino 9K11K13 Chiris *rainor, staff "riter at inde Aournal -2$ydrocar4on agreement clears $ouse Act &ushed 4y Duncan
no" a"aits Senate action5 (0''0'1 htt&600"""#indeAournal#com0main#as&USu4SectionIDZJD_ArticleIDZ'8R(H_SectionIDZJ
(0''07D'19 00K:
A trans4oundary hydrocar4ons agreement 4et"een the U#S# and Meico ? heavily &ushed 4y )e&u4lican *hird
District U#S# )e&# .eff Duncan ? cleared the U#S# $ouse and no" a"aits action from the U#S# Senate#
*he <uter Continental Shelf *rans4oundary $ydrocar4on Agreements Authori@ation Act ? $#)# 'R'1 ? recently &assed the U#S#
$ouse 4y a 7/R?'(' tally# *he 4ill had 4i&artisan su&&ort# *he 4ill "ould set into motion the terms of the U#S#?Meico
*rans4oundary $ydrocar4ons Agreement, "hich governs the develo&ment of oil and natural gas resources along the U#S#?Meico
maritime 4order in the Fulf of Meico# Bander In?Story *he 4ill "ould lift a moratorium on drilling along the
maritime 4order and &rovide access to an area thought to contain more than '(D million 4arrels of oil and 1DJ 4illion cu4ic
feet of natural gas# !hen reached 4y &hone late last "ee%, Duncan said he "as &leased to see the 4ill &ass the $ouse "ith a
4i&artisan vote# W*his "as a good 4ill,W Duncan said# WI thin% it "as the right thing for America, as far as energy inde&endence goes# I
4elieve you "ill see a 4i&artisan vote over in the Senate# IIm ho&ing they ta%e u& the same $ouse 4ill, 4ut if they
ta%e u& a different version ### then it "ould go to conference and "e "ould see "hat "e could do in conference#
)ac 0bama doesn6t pus$
0bama won6t pus$##empirics
-oman PK)PK13 staff "riter at rig@one -Karen ;oman, 2!hite $ouse Cannot Su&&ort Fulf *rans4oundary ;ill5 .une 7R,
7D'1 htt&600"""#rig@one#com0ne"s0oilTgas0a0'7(17R0!hiteT$ouseTCannotTSu&&ortTFulfT*rans4oundaryT;ill9 00K:
*he <4ama administration cannot su&&ort a 4ill that "ould move for"ard esta4lishing a frame"or%
for oil and gas e&loration and &roduction in the trans4oundary @one in the Fulf of Meico, the <ffice of
Management and ;udget -<M;9 re&orted *uesday# *he !hite $ouse does su&&ort the goal set out in $#)# 'R'1
to &rovide Congressional a&&roval of the agreement and allo" the Secretary of the Interior to im&lement the
agreement# $o"ever, the administration Wstrongly o4AectsW to eem&ting actions ta%en 4y &u4lic
com&anies in accordance "ith trans4oundary agreements from re=uirements under Section '/DJ of the Dodd?
Cran% Act and the Securities and Echange CommissionIs Natural )esource Etraction Disclosure )ule#
Wyden and Mur"ows"i pus$ t$e plan
T/( 13 -*argeted Ne"s Service, 2 Sen# !yden Introduces ;ill to Authori@e Im&lementation of U#S#?Meico *rans4oundary
$ydrocar4on Agreement5, A&r 1D, 7D'1, &ro=uest9 00K:
!AS$INF*<N, A&ril 1D ?? Sen# )on !yden, D?<re#, has introduced legislation -S# H'79 to Wauthori@e the Secretary of
the Interior to ta%e actions to im&lement the Agreement 4et"een the United States of America and the
United Meican States Concerning *rans4oundary $ydrocar4on )eservoirs in the Fulf of Meico#W
*he 4ill "as introduced on A&ril 7/ and "as co?s&onsored 4y Sen# Bisa Mur%o"s%i, )?Alas%a# *he legislation "as
referred to the Senate Energy and Natural )esources Committee#
)ac atA "riti"
t$e alternative is stuc" in t$e irrelevant world of academia 3 concrete action is
inevitable and is t$e only way to fix real world problems
,riedric$s and Hratoc$wil, E -.brg, University Becturer in Politics, <ford De&artment of
International Develo&ment, University of <ford, and Criedrich, Professor of International
)elations, De&artment of Political and Social Sciences, Euro&ean University Institute, 2<n
Acting and Kno"ing6 $o" Pragmatism Can Advance International )elations )esearch and
Methodology,5 International <rgani@ation, Xolume R1, Call 7DD8, &g# (D'?(1', &df9
Acce&ting the conse=uences of the failure of false e&istemological am4itions does not mean an end to
all critical in=uiry, nor is it nihilism, relativism, or 2anything goesm5 If there are no incontroverti4le foundations of scientinc
%no"ledge, a &ragmatic strategy of %no"ledge generation is the o4vious alternative . In this s&irit, "e have
oeshed out &ro4lems of research design as they arise "hen one o&ts for a &ragmatic a&&roachm *his is not to claim that a4duction is
the only &ossi4le &ragmatic a&&roach, nor is it to deny that other forms of scientinc in=uiry have their legitimate &lacem !e do
argue, ho"ever, that a4duction re&resents a good 4et in &ursuing social scientinc research after the
failure of traditional e&istemology to &rovide the incontroverti4le foundations of %no"ledge#
In fairness, a4duction is a ris%y endeavor since there is no algorithm to guarantee successful research# <f course
the same a&&lies to &ositivist methodologies such as theory?testing, although novices are often lured into 4elieving that a &ositivistic
logic of in=uiry is a guarantee of scientinc successm ;ut 4e that as it may, "ith a4duction there is a danger of endlessly
&roliferating com&leity if one does not ta%e the necessary &recautions# As "e have seen, ho"ever,
follo"ing a fe" &ractical &rinci&les can dramatically increase the li%elihood that a research effort
"ill lead to meaningful results that "ill 4e acce&ted 4y the relevant evaluators and a "ider audiencem Moreover, the ris%
inherent in a4duction is also the &rice for learning something genuinely ne"m <nly "hen the range of &ossi4le results is
&redetermined 4y the %ind of =uestions "e as%, as in the case of theory testing, is there no ris% of indeterminacym ;ut then neither is
there a chance of any real sur&rise#
As "e have seen, &ragmatism as the consensus?oriented &ractice of discursive communities and &ragmatism as a device for the
generation of useful %no"ledge are t"o sides of the same coin# Discursive communities can go com&letely astray
"hen they are so alienated from their social environment that they disregard &lain commonsense# *a%e as an
eam&le the medieval de4ate on "hether the duc% is a 4ird or a nsh, or &eriodical discussions among I) scholars on "hat matters
more, structure or agencym Such de4ates =uic%ly &eter out "hen %no"ledge is understood as a social &roduct and, at the same time,
lia4le to some &ur&osem Pragmatism must therefore neither 4e reduced to the eisting eor fa4ricated\ consensus of a narro" grou&
of scientists, nor to the utility of results regardless of their &resu&&ositions and meaningm An academic research &roAect should carry
the day if, and only if, it fulnls the follo"ing t"o criteria6 nrst, it should 2"or%5 as a reasona4le res&onse to the &ro4lem at handG and
second, it should convince the relevant evaluatorsm Academic communities should not 4ecome so self?
referential to 4ehave as the sole Audges of their o"n discourse, "ithout considering "hat other tri4unals have ruled
or "hat the Aury says#
It is im&ortant to maintain the communica4ility of our research =uestions and nndings not only to fello" s&ecialists 4ut also to a
"ider academic audience and, ultimately, society at largem It is also im&ortant that "e listen to "hat these other constituencies have
to saym It matters if &hiloso&hers of science have reached the conclusion that there is no e&istemological 4asis for the
accumulation of la"?li%e statements# It similarly matters if &olitical decision ma%ers and &eo&le interested in &olitics
are not interested in our theoretical ruminations 4ecause they either do not understand them or do not see their utilitym Ideally, the
nndings of em&irical research and the gist of theoretical de4ates should 4e re&orted in a voca4ulary close enough to everyday
language to allo" for cross?community dialogue#
*he a&&ro&riate res&onse to the e&istemological im&asse is neither indulgence in endless meta?
theoretical de4ating nor a candid denial of the &ro4lem, 4ut the &ursuit of a &ragmatic a&&roach to
research and methodologym <r, more 4luntly6 let us recogni@e that neither lofty theory 4ashing nor clueless
research activism can &rovide secure foundations for our %no"ledge, and let us instead see% %no"ledge
that "ill ena4le us to deal "ith relevant &ro4lems and, ultimately, to nnd our "ay through the
com&leities of the social "orld#
0nly small reforms li"e t$e plan institutionali:e c$ange and get ot$ers to sign onto
t$e alternative
Wrig$t, 9 -Eri% <lin, Xilas Distinguished Professor of Sociology at the University of !isconsin,
2Fuidelines for Envisioning )eal Uto&ias,5 Soundings, A&ril 7DD(,
"""#ssc#"isc#edu0e"right0Pu4lished[7D"riting0Fuidelines?soundings#&df9
/# !aystations *he final guideline for discussions of envisioning real uto&ias concerns the im&ortance of "aystations# *he
central &ro4lem of envisioning real uto&ias concerns the via4ility of institutional alternatives that
em4ody emanci&atory values, 4ut the &ractical achieva4ility of such institutional designs often de&ends
u&on the eistence of smaller ste&s, intermediate institutional innovations that move us in the right direction 4ut
only &artially em4ody these values# Institutional &ro&osals "hich have an all?or?nothing =uality to
them are 4oth less li%ely to 4e ado&ted in the first &lace, and may &ose more difficult transition?cost &ro4lems if
im&lemented# *he catastro&hic e&erience of )ussia in the 2shoc% thera&y5 a&&roach to mar%et reform is historical testimony to this
&ro4lem# !aystations are a difficult theoretical and &ractical &ro4lem 4ecause there are many instances in "hich &artial reforms
may have very different conse=uences than full? 4odied changes# Consider the eam&le of unconditional 4asic income# Su&&ose that
a very limited, 4elo"?su4sistence 4asic income "as instituted6 not enough to survive on, 4ut a grant of income unconditionally given
to everyone# <ne &ossi4ility is that this %ind of 4asic income "ould act mainly as a su4sidy to em&loyers "ho &ay very lo" "ages,
since no" they could attract more "or%ers even if they offered 4elo" &overty level earnings# *here may 4e good reasons to institute
such "age su4sidies, 4ut they "ould not generate the &ositive effects of a U;I, and therefore might not function as a ste&&ing stone#
!hat "e ideally "ant, therefore, are intermediate reforms that have t"o main &ro&erties6 first, they concretely
demonstrate the virtues of the fuller &rogram of transformation, so they contri4ute to the ideological 4attle
of convincing &eo&le that the alternative is credi4le and desira4leG and second, they enhance the ca&acity for
action of &eo&le, increasing their a4ility to &ush further in the future# !aystations that increase &o&ular &artici&ation and 4ring
&eo&le together in &ro4lem?solving deli4erations for collective &ur&oses are &articularly salient in this regard#
*his is "hat in the '8(Ds "as called 2nonreformist reforms56 reforms that are &ossi4le "ithin eisting
institutions and that &ragmatically solve real &ro4lems "hile at the same time em&o"ering &eo&le in "ays
"hich enlarge their sco&e of action in the future#
Aff impacts are true ### t$eir H dissolves into paralysis ### our worldview is
inevitable
Qac"son, 11 -Patric% *hadeus, associate &rofessor of I), School of International Service at
American University, 2*he Conduct of In=uiry in International )elations,5 &g# /(?/89
Perha&s the greatest irony of this instrumental, decontetuali@ed im&ortation of 2falsification5 and its critics into
I) is the "ay that an entire line of thought that &rivileged disconfirmation and refutationEno matter ho" com&licated that
disconfirmation and refutation "as in &racticeEhas 4een transformed into a license to "orry endlessly a4out
foundational assum&tions# At the very 4eginning of the effort to 4ring terms such as 2&aradigm5 to 4ear on the study of
&olitics, Al4ert <# $irschman -'8(D4, 11H9 noted this very danger, suggesting that "ithout 2a little more Nreverence for life> and a
little less straightAac%eting of the future,5 the focus on &roducing internally consistent &ac%ages of assum&tions
instead of actually eamining com&le em&irical situations "ould result in scholarly &aralysis# $ere
as else"here, $irschman a&&ears to have 4een =uite &rescient, inasmuch as the maAor effect of &aradigm and research &rogramme
language in I) seems to have 4een a series of de4ates and discussions a4out "hether the fundamentals of a given school of thought
"ere sufficiently 2scientific5 in their construction# *hus "e have de4ates a4out ho" to evaluate scientific
&rogress, and attem&ts to &ro&ose one or another set of research design &rinci&les as uni=uely scientific, and inventive,
2reconstructions5 of I) schools, such as Patric% .ames> 2ela4orated structural realism,5 su&&osedly for the &ur&ose of &lacing them
on a firmer scientific footing 4y ma%ing sure that they have all of the re=uired elements of a 4asically Ba%atosian'8 model of science
-.ames 7DD7, R(, 8HO'D19#
*he 4et "ith all of this scholarly activity seems to 4e that if "e can Aust get the fundamentals right, then scientific &rogress "ill
inevita4ly ensue # # # even though this is the &recise o&&osite of "hat Po&&er and Kuhn and Ba%atos argued\ In fact, all of this
o4sessive interest in foundations and starting?&oints is, in form if not in content, a lot closer to logical
&ositivism than it is to the concerns of the falsificationist &hiloso&hers, des&ite the &rominence of language a4out 2hy&othesis
testing5 and the concern to formulate testa4le hy&otheses among I) scholars engaged in these endeavors# *hat, a4ove all, is "hy I
have la4eled this methodology of scholarshi& neo&ositivist# !hile it ta%es much of its self Austification as a science from criticisms of
logical &ositivism, in overall sensi4ility it still o&erates in a visi4ly &ositivist "ay, attem&ting to construct %no"ledge from the ground
u& 4y getting its foundations in logical order 4efore concentrating on ho" claims encounter the "orld in terms of their theoretical
im&lications# *his is 4y no means to say that neo&ositivism is not interested in hy&othesis testingG on the contrary, neo&ositivists are
etremely concerned "ith testing hy&otheses, 4ut only after the fundamentals have 4een soundly esta4lished# Certainty, not
conAectural &rovisionality, seems to 4e the goalEa goal that, ironically, Po&&er and Kuhn and Ba%atos "ould all reAect#
5$ysical survival and extinction outweig$s ontology
Qonas, EP -$ans, Cormer Alvin .ohnson Professor of Philoso&hy at the Ne" School for Social
)esearch, Cormer Eric Xoegelin Xisiting Professor at the University of Munich, 2Mortality and
Morality6 A Search for the Food After Ausch"it@, &g# '''?''79
!ith this loo% ahead at an ethics for the future, "e are touching at the same time u&on the =uestion of the future of freedom# *he
unavoida4le discussion of this =uestion seems to give rise to misunderstandings# My dire &rognosis that not only our material
standard of living 4ut also our democratic freedoms "ould fall victim to the gro"ing &ressure of a "orld"ide ecological crisis, until
finally there "ould remain only some form of tyranny that "ould try to save the situation, has led to the accusation that I am
defending dictatorshi& as a solution to our &ro4lems# I shall ignore here "hat is a confusion 4et"een "arning and recommendation#
;ut I have indeed said that such a tyranny "ould still 4e 4etter than total ruinG thus, I have ethically acce&ted it as an alternative# I
must no" defend this stand&oint, "hich I continue to su&&ort, 4efore the court that I myself have created "ith the main argument of
this essay# Cor are "e not contradicting ourselves in &ri@ing &hysical survival at the &rice of freedomU Did "e not say that freedom
"as the condition of our ca&acity for res&onsi4ilityEand that this ca&acity "as a reason for the survival of human%indU ;y tolerating
tyranny as an alternative to &hysical annihilation are "e not violating the &rinci&le "e esta4lished6 that the $o" of eistence must
not ta%e &recedence over its !hyU :et "e can ma%e a terri4le concession to the &rimacy of &hysical survival
in the conviction that the ontological ca&acity for freedom, inse&ara4le as it is from man>s 4eing, cannot
really 4e etinguished, only tem&orarily 4anished from the &u4lic realm# *his conviction can 4e su&&orted 4y e&erience "e
are all familiar "ith# !e have seen that even in the most totalitarian societies the urge for freedom on the &art
of some individuals cannot 4e etinguished, and this rene"s our faith in human 4eings# Fiven this faith, "e
have reason to ho&e that, as long as there are human 4eings "ho survive, the image of Fod "ill continue to eist
along "ith them and "ill "ait in concealment for its ne" hour# !ith that ho&eE"hich in this &articular case ta%es &recedence over
fearEit is &ermissi4le, for the sa%e of &hysical survival, to acce&t if need 4e a tem&orary a4sence of
freedom in the eternal affairs of humanity# *his is, I "ant to em&hasi@e, a "orst?case scenario, and it is the foremost tas% of
res&onsi4ility at this &articular moment in "orld history to &revent it from ha&&ening# *his is in fact one of the no4lest of duties
-and at the same time one concerning self?&reservation9, on the &art of the im&erative of res&onsi4ility to avert future coercion that
"ould lead to lac% of freedom 4y acting freely in the &resent, thus &reserving as much as &ossi4le the a4ility of future generations to
assume res&onsi4ility# ;ut more than that is involved# At sta%e is the &reservation of the Earth>s entire miracle of
creation, of "hich our human eistence is a &art and 4efore "hich man reverently 4o"s, even "ithout
&hiloso&hical 2grounding#5 $ere too faith may &recede and reason follo"G it is faith that longs for this &reservation of the
Earth -fides =uaerens intellectum9, and reason comes as 4est it can to faith>s aid "ith arguments, not %no"ing or even as%ing ho"
much de&ends on its success or failure in determining "hat action to ta%e# !ith this confession of faith "e come to the end of our
essay ontology#
xtinction outweig$s 3 it6s ontologically destructive 3 deat$ is always worse t$an a
loss of being
5aterson, 3 -Craig, De&artment of Philoso&hy, Providence College, )hode Island, 2A Bife Not
!orth BivingU,5 Studies in Christian Ethics, Xolume 'R, August 7DD1, &g# '?7D, Sage .ournals,
&df9
Contrary to those accounts, I "ould argue that it is death &er se that is really the o4Aective evil for us, not 4ecause it de&rives us of a
&ros&ective future of overall good Audged 4etter than the alternative of non?4eing# It cannot 4e a4out harm to a former &erson "ho
has ceased to eist, for no &erson actually suffers from the su4?se=uent non?&artici&ation# )ather, death in itself is an evil to us
4ecause it ontologically destroys the current eistent su4Aect E it is the ultimate in meta&hysical
lightening stri%es# *he evil of death is truly an ontological evil 4orne 4y the &erson "ho already eists,
inde&endently of calculations a4out 4etter or "orse &ossi4le lives# Such an evil need not 4e consciously
e&erienced in order to 4e an evil for the %ind of 4eing a human &erson is# Death is an evil 4ecause of the change in %ind it 4rings
a4out, a change that is destructive of the ty&e of entity that "e essentially are# Anything, "hether caused naturally or caused 4y
human intervention -intentional or unintentional9 that drastically interferes in the &rocess of maintaining the &erson in eistence is
an o4Aective evil for the &erson# !hat is crucially at sta%e here, and is dialectically su&&ortive of the self?evidency of the 4asic good
of human life, is that death is a radical interference "ith the current life &rocess of the %ind of 4eing that "e are# In
conse=uence, death itself can 4e credi4ly thought of as a N&rimitive evil> for all &ersons, regardless of the etent to "hich they are
currently or &ros&ectively ca&a4le of &artici&ating in a full array of the goods of life#
In conclusion, concerning "illed human actions, it is Austifia4le to state that any intentional reAection of human life
itself cannot therefore 4e "arranted since it is an e&ression of an ultimate disvalue for the su4Aect,
namely, the destruction of the &resent &ersonG a radical ontological good that "e cannot 4egin to "eigh
o4Aectively against the travails of life in a rational manner# *o deal "ith the sources of disvalue -&ain, suffering, etc#9
"e should not see% to irrationally destroy the &erson, the very source and condition of all human &ossi4ility#
xistence is prior to value 3 sub;ective desires
Hacou, 1 -Amien, 2!$: EXEN MINDU <n *he A Priori Xalue <f NBife>,5 Cosmos and $istory6
*he .ournal of Natural and Social Philoso&hy, Xolume J, Issue '?7,
htt&600cosmosandhistory#org0inde#&h&0Aournal0article0vie"0870'HJ9
Curthermore, that manner of finding things good that is in &leasure can certainly not eist in any "orld "ithout consciousness -i#e#,
"ithout 2life,5 as "e no" understand the "ord9Eslight analogies &ut aside# In fact, "e can 4egin to develo& a more so&histicated
definition of the conce&t of 2&leasure,5 in the 4roadest &ossi4le sense of the "ord, as follo"s6 it is the common &sychological element
in all &sychological e&erience of goodness -4e it in Aoy, admiration, or "hatever else9# In this sense, &leasure can al"ays 4e &ictured
to 2mediate5 all a"areness or &erce&tion or Audgment of goodness6 there is &leasure in all consciousness of things
goodG &leasure is the common element of all conscious satisfaction# In short, it is sim&ly the very e&erience of li%ing
things, or the li%ing of e&erience, in general# In this sense, &leasure is, not only uni=uely characteristic of life 4ut also, the
core e&ression of goodness in lifeEthe most general sign or &henomenon for favora4le conscious valuation, in other
"ords# *his does not mean that 2good5 is a4solutely synonymous "ith 2&leasant5E"hat "e value may "ell go 4eyond
&leasure# -*he fact that "e value things needs not 4e reduced to the e&erience of li%ing things#9 $o"ever, "hat "e value 4eyond
&leasure remains a matter of s&eculation or theory# Moreover, "e note that a variety of things that may seem other"ise unrelated are
correlated "ith &leasureEsome more strongly than others# In other "ords, there are many things the e&erience of
"hich "e li%e# Cor eam&le6 the admiration of othersG seG or roc%?&a&er?scissors# ;ut, again, "hat
they are is irrelevant in an in=uiry on a &riori valueE"hat gives us &leasure is a matter for em&irical
investigation#
*hus, "e can see no" that, in general, something &rimitively valua4le is attaina4le in livingEthat is,
&leasure itself# And it seems e=ually clear that "e have a &riori logical reason to &ay attention to the "orld in any "orld "here
&leasure eists# Moreover, "e can no" also articulate a foundation for a security interest in our life6 since the good of
&leasure can 4e found in living -to the etent &leasure remains attaina4le9,P'(Q and only in living, therefore, a
&riori, life ought to 4e continuously -and indefinitely9 &ursued at least for the sa%e of &reserving the
&ossi4ility of finding that good#
$o"ever, this &latitude a4out the value that can 4e found in life turns out to 4e, at this &oint, insufficient for our &ur&oses# It seems
to amount to very little more than recogni@ing that our su4Aective desire for life in and of itself sho"s that life has some o4Aective
value# Cor "hat difference is there 4et"een saying, 2living is uni=ue in 4enefiting something I value -namely, my &leasure9G
therefore, I should desire to go on living,5 and saying, 2I have a uni=ue desire to go on livingG therefore I should have a desire to go
on living,5 "hereas the latter &ro&osition immediately seems senselessU In other "ords, 2life gives me &leasure,5 says little more
than, 2I li%e life#5 *hus, "e seem to have arrived at the conclusion that the fact that "e already have some -su4Aective9
desire for life sho"s life to have some -o4Aective9 value# ;ut, if that is the most "e can say, then it seems our
enter&rise of Austification "as =uite su&erficial, and the su4Aective0o4Aective distinction "as uselessEfor all "e have really done is
highlight the corres&ondence 4et"een value and desire# Perha&s, our in=uiry should 4e a 4it more com&le#
Representations don6t s$ape reality
Balb;Trn, = -Morten, PhD in the De&artment of Political Science at Aarhus, 2*he Middle East
and Palestine6 Flo4al Politics and )egional Conflict,5 &g# R(?RH9
As mentioned 4efore, the relational &ers&ective is a criti=ue of 4oth the neglect of the issue of <therness 4y the I) mainstream and
the "ay in "hich &ro&onents of an essentialist a&&roach relate to the <ther# Cor this reason, it "ould 4e natural to assume that
&ro&onents of this second attem&t to Wculturali@eW the study of international relations "ould 4e &articularly %een to address the
=uestion of ho" to ac%no"ledge cultural diversity "ithout committing the sins of orientalism# Indeed, this is also "hat Said is
stressing in the introduction to <rientalism6 *he most im&ortant tas% of all "ould 4e to underta%e studies in contem&orary
alternatives to <rientalism, to as% ho" one can study other cultures and &eo&les from a li4ertarian, or nonre&ressive and non?
mani&ulative &ers&ective# -'88/6 7J9 $o"ever, he then goes on to add that Wthese are all tas%s left em4arrassingly incom&lete in this
studyW -Said, '88/6 7J9# Boo%ing at other analyse s4ased on a relational conce&tion of culture, it 4ecomes a&&arent that the latter
remar% is verytelling for this %ind of understanding of culture as a "hole -e#g# Doty, '8816 1'/9# Des&ite a4lan% reAection of the
universalism of I) mainstream and, at least in &rinci&le, a recognition of the eistence of different <thers "ho are not only
&roAections of o"n fantasies and desires, in &ractice, &ro&onents of this alternative a&&roach nonetheless usually leave the =uestion
of ho" to address and a&&roach the actual cultural <ther unans"ered# *his might very "ell 4e an unintended outcome of the
&reviously mentioned radical constructivism associated "ith this a&&roach# *hus, 4y stressing ho" the re&resentation of
the <ther is intimately related to the construction of identities or a su4tle "ay of &erforming &o"er, one ris%s 4eing caught
in a %ind of e&istemological and moral crisis, characteri@ed 4y a nagging dou4t a4out "hether it really is &ossi4le to gain
any %no"ledge of <thers or if "e are Aust &roAecting our o"n fantasies, and 4y a&ronounced fear that our re&resentations
are silencing voices so that "e un"ittingly are ta%ing &art in a su4tle &erformance of &o"er -$astru&, '8876 /J9# In merely
dealing "ith the relationshi& 4et"een the re&resentcr and his re&resentations, these dilemmas can 4e Wavoided#W $o"ever, at the
same time one "rites off the o&&ortunity to relate to cultural diversity as anything 4ut discursive &roducts of oneIs o"n fantasies and
&roAections# *his is &recisely the criti=ue that su&&orters of the relational understanding of culture have 4een facing# Crom this
&ers&ective, it a&&ears less sur&rising that Said has had so much more to offer onthe dynamics of !estern re&resentations of the
Middle East than on real alternatives to the orientalist de&iction of the region# Unfortunately, this second 4id for a culturalistic
a&&roach to the study of international relations is not only aligned "ith a num4er of very "elcome critical =ualities that may enrich
the study of international relations# It is also related to a &ro4lematic tendency to overreact "hen it comes to
addressing the &revalent ;lindness to the Self "ithin I) mainstream and among su4scri4ers to the essentialist conce&tion of culture#
*hus, as&irations of &romoting a larger self consciousness in the study of international relation end u&
4ecoming self?centeredness, Aust as the attem&t to &romote a larger sensitivity to"ard the <ther in reality 4ecomes
oversensitivity to saying anything su4stantial "hen it comes to actual <ther# *his is &ro4lematic, &artly 4ecause "e are left
"ithout any real idea as to ho" to a&&roach actual Middle Eastern international relations rather than !estern
re&resentations of theseG and &artly 4ecause there is the ris% of losing sight of the material and very concrete
conse=uences that s&ecific re&resentations may engender -Krishna, '8819# Also, the &ro&onents of this second WculturalisticW
alternative seem to 4e 4etter at as%ing im&ortant and critical =uestions than at offering attractive ans"ers#
/o single root cause of war
+as$man, )" -Freg, Professor of Political Science at Salis4ury State University 2!hat Causes
"arU6 An introduction to theories of international conflict,5 &g# 89
*"o "arnings need to 4e issued at this &oint# Cirst, "hile "e have 4een using a single varia4le e&lanation of "ar merely for the sa%e
of sim&licity, multivariate e&lanations of "ar are li%ely to 4e much more &o"erful# Since social and &olitical 4ehaviors
are etremely com&le, they are almost never e&laina4le through a single factor# Decades of
research have led most analysts to reAect monocausal e&lanations of "ar# Cor instance, international
relations theorist .# David Singer suggests that "e ought to move a"ay from the conce&t of 2causality5 since it has 4ecome associated
"ith the search for a single cause of "arG "e should instead redirect our activities to"ard discovering
2e&lanations5Ea term that im&lies multi&le causes of "ar, 4ut also a certain element of
randomness or chance in their occurrence#
)ac lin" uni!ueness
4in" s$ould6ve been triggeredG0bama6s meeting wit$ /ieto
Martin and Wood 13 O *Director of the Energy Program at the Institute of the Americas at
the University of California, San DiegoG **Director of the Meico Institute at the !oodro"
!ilson International Center for Scholars, &rofessor for '( years in Meico and &reviously "as
director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de
M,ico -I*AM9 in Meico City -.eremy M# and Duncan, 2U#S# ShoUld Act 3Uic%ly on
trAnS4oUndAry hydrocAr4on Agreement !ith meico,5 !orld Politics )evie", May 1, 7D'1,
htt&600"""#iamericas#org0ne"s0!P)TUSTMeicoTD/D17D'1#&df900;"ang
:esterday, U#S# President ;arac% <4ama and Meican President Enri=ue Pena Nieto met in Meico City to
discuss the 4ilateral relationshi&# It "as <4ama>s first meeting "ith Pena Nieto since the latter too% office in Decem4er,
although the t"o did meet "hen Pena Nieto visited !ashington as &resident?elect in Novem4er#
In star% contrast to meetings 4et"een the American and Meican &residents in recent years, the agenda included 4ut "as not
dominated 4y security and organi@ed crime# Instead, as underscored 4y the &residents> Aoint &ress conference,
<4ama>s visit to Meico City offered a varied menu of issues such as trade, education, innovation, North American
com&etitiveness and energy# <n this last issue, it is li%ely that the Meican &resident in=uired a4out
the status of the *rans4oundary $ydrocar4ons Agreement, signed "ith much fanfare in Bos Ca4os in Ce4ruary
7D'7#
*he agreement creates a frame"or% for resolving the thorny issue of o"nershi& of oil and gas reserves that eist acrossEor rather
underneathEthe international 4order 4et"een Meico and the U#S# in the Fulf of Meico# *his &ro&osed frame"or% "ould &ut to
rest long?standing Meican fears of the 2efecto &o&ote,5 or stra" effectEthe idea that U#S# com&anies aim to slur& u& Meican oil
reserves from across the nations> maritime 4order# *he 7D'7 agreement mar%ed a maAor shift 4y &roviding legal certainty for
e&loration and &roduction activities near the 4order, and 4y allo"ing for the &ros&ect of long?&rohi4ited Aoint develo&ment of
reserves that straddle the Fulf "aters of 4oth countries# At its core, the agreement see%s to set u& legal guidelines for com&anies to
Aointly develo& socalled trans4oundary reservoirs and lift the moratorium on oil and gas e&loration and &roduction for roughly '#/
million acres in the Fulf#
Meico underscored its commitment to the agreement 4y =uic%ly ratifying itG the Meican Senate a&&roved the treaty in A&ril 7D'7#
In the United States, mean"hile, &rogress stalled for more than a year# ;ut Aust in time for
yesterday>s 4ilateral meeting, the agreement is again under discussion as legislators revive the
dormant ratification &rocess, "hich is good ne"s for those eager to see its a&&roval in the U#S# Indeed, according to the
!hite $ouse, <4ama s&o%e in &ositive terms yesterday a4out the recent &rogress made on the
agreement6 ;oth the $ouse Su4committee on !estern $emis&here Affairs and the $ouse
Committee on Natural )esources recently held hearings focused on the challenges and
o&&ortunities that a&&roval of the accord "ould &resent for the United States# <n A&ril 'H, a 4ill "as
introduced in the $ouse of )e&resentatives that "ould ma%e "ay for the a&&roval and im&lementation of the terms of the
agreement#
)ac atA natural gas exports disadGdefense
/atural gas exports to Mexico $ig$ now
+roo"s 9K1K13 staff "riter for the Ciancial *imes -Ed Croo%s, 2US gas e&orts give Meico com&etitive edge over other
countries5, .uly ', 7D'1
htt&600"""#ft#com0cms0s0D0'H/7RR8e?e7/4?''e7?a(fa?DD'JJfea4dcD#html`a@@7a=dC<LmN9 00K:
US natural gas e&orts to Meico hit a record last year, hel&ing hold do"n the country>s energy costs as its
industry gre" ra&idly# Planned ne" &i&elines that "ill ena4le further ra&id gro"th in im&orts from the US "ill
strengthen and loc% in that advantage, and hel& to give Meico a com&etitive edge over other emerging economies
for as long as North American shale &roduction remains strong# China>s manufacturing la4our costs overtoo% Meico>s last year
4ecause of its high rates of "age inflation, and its energy costs are also significantly higher# ;y 7D'/, China>s total manufacturing
costs "ill 4e a4out 8/ &er cent of US levels, "ith gas contri4uting a4out J &ercentage &oints of that, "hile Meico>s "ill 4e Aust H8 &er
cent, "ith gas at Aust ' &ercentage &oint, according to ne" research from the ;oston Consulting Frou&# Meico>s industrial out&ut
has 4een falling this year, 4ut its lo"er costs and &roimity to the US, "hich reduces trans&ort costs and increases flei4ility, "ill
ma%e it increasingly com&etitive as a manufacturing location, analysts say# Com&anies including $onda and Nissan, the .a&anese
car manufacturers, and last "ee% Feneral Motors of the US, have recently announced ne" investments in Meico, and $al Sir%in of
;CF said he e&ected more to come# 2!e may not have really seen it in the investment data yet, 4ut Meico is 4eing discussed in
4oardrooms, and it>s loo%ing attractive,5 he said# US gas e&orts to Meico rose '8 &er cent to R7D4n cu4ic
feet last year, meeting a4out 7D &er cent of the country>s demand# Domestic &roduction has 4een in decline
4ecause of under investment 4y Peme, the national oil com&any# At that rate, the &i&elines from the US to Meico
"ere full, forcing the government to im&ort e&ensive li=uefied natural gas, "hich costs more than four times the 4enchmar% US
gas &rice of a4out V1#RD &er million ;ritish thermal units# $o"ever, Meico &lans to more than dou4le its im&ort
ca&acity from the US "ith the )amones &i&eline &roAect, its 4iggest energy infrastructure develo&ment for JD years# Phase one is
&lanned to 4e in o&eration net year# Maria .ose $ernande@ of the consultancy Eurasia Frou& said6 2*he government has resorted to
the more costly BNF im&orts, su4sidising them to an etent 4ut also rationing su&&ly as "ellG a fi insufficient to satisfy industrial
demand# Im&orts from the US are much chea&er, so there is a tremendous economic incentive to 4uild ne" &i&elines#5 *he
North American Cree *rade Agreement means US com&anies see%ing to e&ort gas to Meico do
not face the same regulatory hurdles as &ro&osed BNF &lants see%ing to e&ort gas to countries "ithout a trade
agreement#
/atural gas exports inevitableG.0 permits
*argreaves PK=K13 energy corres&ondent for CNN -Steve $argreaves, 2U#S# ste&s u& natural gas e&orts5, .une J, 7D'1
htt&600money#cnn#com07D'10DR0DJ0ne"s0economy0natural?gas?e&orts0inde#html9 00K:
*he United States "ill soon start e&orting more of its energy 4ounty# *hatIs ma%ing oil and gas com&anies
ha&&y, American manufacturers nervous, and some environmentalists livid# Bast month, the Energy De&artment
a&&roved a second a&&lication to e&ort natural gas, this time from a facility along the Fulf Coast &artly o"ned
4y ConocoPhilli&s -C<P, Cortune /DD9# *he a&&roval came t"o years after D<E granted the first natural gas e&ort license to
Cheniere Energy -BNF9, "hich also has a &lant on the Fulf Coast# *he t"o?year ga& "as the result of D<E "aiting for studies on ho"
gas e&orts "ould im&act the economy# !ould e&orts significantly raise &rices for consumersU !ould they cause manufacturers to
leave, ta%ing Ao4s "ith themU *hose studies ?? along "ith several from the &rivate sector ?? are no" done# *he re&orts all generally
said e&orts "ould 4e a good thing# So no" thereIs every indication that the &ace of e&ort licenses "ill =uic%en# At a
recent congressional hearing, a D<E official told la"ma%ers that it too% a4out t"o months to a&&rove
the most recent a&&lication# Although ne"ly a&&ointed Energy Secretary Ernest Moni@ said heIll revie" the &ermit &rocess
4efore the net a&&lication, analysts too% that to mean that ne" &ermits could start rolling out as fast as one every t"o months# W<ur
vie" is that the Moni@ revie" is most li%ely to 4e short and lead to the same conclusion as many revie"ers of the
issue ?? that BNF -li=uefied natural gas9 e&orts "ill &rovide a net 4enefit to the U#S,W !hitney Stanco, an energy
analyst at Fuggenheim SecuritiesI !ashington )esearch Frou&, "rote in a research note last "ee%# !hile many may 4elieve e&orts
"ill have a net 4enefit, that o&inion is certainly not unanimous#
&( will exportGs$ale boom and (abine 5ass
($u"man 9K1PK13 Science editor, ;;C Ne"s -David Shu%man, 2US to 4egin e&orting Ifrac%edI gas5, (0'R07D'1
htt&600"""#44c#co#u%0ne"s0science?environment?711'(1(D9 00K:
US gas &roduced 4y the controversial techni=ue of Wfrac%ingW is due to 4e e&orted for the first time# A V7D4n &roAect to &re&are an e&ort
terminal is under "ay in Bouisiana# *he huge facility on the Fulf of Meico "as originally designed to im&ort natural gas to the US#
;ut "ithin t"o years of o&ening, the o"ners decided to reverse the &rocess# In that time, American shale gas has 4ecome
a4undant and relatively chea&# <ne of the first contracts "ill see shale gas shi&&ed to ;ritain
under a contract "ith Centrica# *he decision to sell gas a4road illustrates the etraordinary scale
of the shale revolution in the United States "ith a further huge e&ansion forecast# A com4ination of ne"
seismic imaging techni=ues, the a4ility to drill hori@ontally and the &rocess of fracturing the shale roc% itself has transformed the energy scene in the
United States# *he &lant at Sa4ine Pass, o"ned 4y Cheniere Energy, "as constructed to receive shi&ments of li=uefied natural gas and a handful of
deliveries "as made# ;ut no" the com&any, 4an%ing on gro"ing glo4al demand for chea& American gas, is investing in four massive systems, %no"n as
WtrainsW, to li=uefy gas ready for e&ort# !hen com&leted, the terminal is &lanned to e&ort nearly 7D million tonnes of BNF a year# *he first shi&ments
are scheduled for 7D'/# According to Shell, one of the maAor &roducers of shale gas in the US, &ros&ects have gone through a sur&risingly ra&id
transformation# Peter ;rett, manager of ShellIs onshore "ell o&erations in the US, told ;;C Ne"s that there is Wmassive &otentialW# WItIs huge ? Aust five
years ago "e "ere tal%ing a4out im&orting BNF and 4ringing that in from overseas and no" "eIre loo%ing at self sufficiency for the net 'DD years in
natural gas# W!eIre ta%ing a long term vie" ? thereIs going to 4e an ever increasing energy demand, "eIre going to need all energy sources and shale gas
"ill 4e a 4ig &art of that#W Cor years, reservoirs of oil and gas in u&&er layers of roc% have 4een etracted 4ut the layer of shale 4elo" ? the Wsource roc%W
in "hich the hydrocar4ons "ere formed ? "as deemed too difficult to e&loit# <ne maAor ne" &ros&ect ? or W&layW, as the industry calls ne" fields ? is the
Eagle Cord shale in southern *eas# Infogra&hic Near the Meican 4order at Carri@o S&rings, this arid scru4land is no" the scene of frenetic activity as
several maAor energy com&anies have moved in# At do@ens of sites, drilling rigs are used to reach at least a mile dee& into the shale, and then at least a
mile hori@ontally through the roc% formation# *y&ically, a do@en "ells can 4e drilled from the same site# *he frac%ing &rocess involves a fleet of truc%s
carrying &um&s to drive a com4ination of "ater, chemicals and W&ro&&antsW ? tiny grains li%e sand ? under high &ressure into the roc%# *his fractures
the shale, forcing o&en tiny fissures "hich the &ro&&ants then hold o&en, allo"ing the gas to flo" out# *he techni=ue is controversial for several
reasons# Cirst, there are concerns a4out the ris% of earth tremors 4ut these have 4een etremely rare des&ite more than a million Wfrac% Ao4sW in the US#
Second, as the "ell &asses through "ater?4earing layers of roc%, there is a ris% of the contamination of drin%ing "ater su&&lies# A dou4le 4arrier ? a
cement lining of the "ell and a steel &i&e ? is designed to &revent any gas reaching a=uifers# .ohn ;ic%ley, "ho manages technology for ShellIs shale
o&erations, said that if drilling and frac%ing are &ro&erly handled, the W&ossi4ility of contamination is very smallW# If methane is found in drin%ing
"ater, there are other e&lanations for ho" it might have got there, he said# W*here could 4e old "ell 4ores that lea%ed in the &ast# :ou could have
methane that naturally migrates u&#W $e conceded that the li%elihood of shale gas 4eing e&loited in other countries 4eyond the US &artly de&ends on
&u4lic reaction# WUntil "e get &eo&le to understand that "eIre doing this in an environmentally friendly manner that could delay or even cancel
o&erations in different countries#W In the 4ig country of south *eas, "ith a s&arse &o&ulation, the &rocess is inevita4ly less controversial than in more
cro"ded areas# In central California, near the to"n of Shafter, "e found that frac%ing o&erations had ta%en &lace almost on the doorste& of a retired
4usinessman, !alt Desatoff# W*hey drilled Aust across street ? they had three giant generators, they Aust started u&# *here "as lighting, 7J0( activity, a
huge "aste &it that "as of concern WIt "as maAor inconvenience ? the activity, the smells, the dust from the truc%s and the noise# W*hey did allocate us
some money for a hotel ? "e intermittently left for a fe" days "hen "e couldnIt ta%e it#W Crac%ing Industry says that if drilling and frac%ing are &ro&erly
handled the ris% of contamination is lo" *he frac%ing o&eration close to Mr DesatoffIs home "as to &roduce oil not gas 4ut the techni=ue is the same#
!e a&&roached the com&any involved 4ut it said it never commented on individual cases# Cor environmentalists, a maAor concern is the =uality of
regulation and the a4ility of the authorities to enforce it# .en Po"is of the Sierra Clu4 said there "as insufficient control over the dum&ing of W"ater
laced "ith chemicalsW, emissions from com&ressor stations and the im&act of &i&eline develo&ment# She also said that the &lan to e&ort US shale gas
carried ris%s# W*here are '( &ro&osals to e&ort natural gas and no one has loo%ed at them as a "hole# W!hat a4out the
&i&elines and the "etlands and the shi&s coming in and outU !hat a4out the "ater "ith this increased trafficU And to get to that e&ort, "hat a4out the
ris%s u&streamUW ;ut for the moment, a shale gas 4oom, made &ossi4le 4y frac%ing, is under "ay in the US "ith
every &ros&ect of it gro"ing for decades to come#
xports are coming now
.altorio 9KEK13 -*ony, Contri4uting !riter, Money Morning 2Natural Fas Com&anies6 BNF E&ort ;oom Still on the
Baunch&ad5 .uly 8, 7D'1, htt&600moneymorning#com07D'10D(0D80natural?gas?com&anies?lng?e&ort?4oom?still?on?the?
launch&ad09 00K:
Anyone investing in natural gas com&anies is eagerly a"aiting ne"s that the li=uefied natural gas -BNF9 e&ort
4oom is officially under"ayY !hile "e still have to "ait, the good ne"s is that last "ee% De&artment of Energy
Secretary Ernest Moni@ told )euters his de&artment "ill go through the a&&lications as =uic%ly as
&ossi4le# $e added that he e&ects the Energy De&artment to conduct a 2fair amount of action5
regarding the a&&lications this year# *his falls in ste& "ith the <4ama Administration>s energy initiatives, "hich
include a &ush for the develo&ment of 2a glo4al mar%et for natural gas#5 *his glo4al natgas mar%et "ill
re&lace the current regional gas mar%ets only if there are large e&orts of chea& natural gas from the U#S# Such e&orts are one main
reason Money Morning Flo4al Energy Strategist Dr# Kent Moors is 4ullish on natural gas &rices in the
years ahead# $e>s also 4ullish a4out the &ros&ects for investors in certain natural gas com&anies
O es&ecially ones &ositioning to &rofit from Asia>s need for BNFY
)ac atA natural gas exports disadGprice
volatility
Top level
xports expand production and solve price volatility Gprevious studies are wrong
Tunstall SK)EK13 research director of the University of *eas at San Antonio Institute for Economic Develo&ment -*homas
*unstall, 2E&orting Natural Fas !ill Sta4ili@e U#S# Prices5, May 78, 7D'1,
htt&600online#"sA#com0article0S;'DDD'J7J'7(HH(171R''RDJ/(H18RJJ'1/HDD7/HJ#html9 00K:
All of this sounds li%e a clear "in?"in# *han%s to hydraulic fracturing and hori@ontal drilling, the U#S# is no" the "orldIs
largest &roducer of natural gas# Natural?gas e&orts &rovide a clean and much?needed source of energy
to our trading &artners and economic gro"th and Ao4s in the U#S# Nevertheless there are o&&onents
"ho argue that the natural?gas mar%et is historically too volatile and that e&orts "ill contri4ute
to higher domestic &rices, harming U#S# consumers and crucial industries such as chemical
manufacturing# Natural?gas &rices over the &ast decade have fluctuated "ildlyEranging 4et"een V7
and V'7 &er thousand cu4ic feet# ;ut revolutionary changes are at "or% that "ill transform the mar%et
landsca&e significantly, contri4uting to more sta4le &rices in the future# At &resent, glo4al
natural?gas mar%ets are not integrated# Prices are (/ cents &er thousand cu4ic feet in Saudi Ara4ia# *hey are V1?VJ in the
U#S# and around V'7 in Euro&e, and as high as V'R?V'( in .a&an# *hese varying &rices are 4ased on short?term
shifts in su&&ly and demand, "hich have created o&&ortunities for ar4itrage through e&orts that "ill 4ring &rices closer
to uniformity# In order to shi& natural gas from the U#S# efficiently, the gas must 4e su&ercooled to
minus 7RD degrees Cahrenheit near an e&ort terminal at a dee&?"ater &ort and transformed into li=uefied natural
gasEa transformation that reduces the volume of gas 4y more than RDD times# An BNF tan%er then trans&orts the &roduct to its
designated foreign mar%et# !hen the BNF reaches its destination, it is re?va&ori@ed -or Wre?gasifiedW9 4efore 4eing shi&&ed to its
final destination 4y &i&eline# Each ste& in this &rocess has significant costs# Cor eam&le, given the current "orld?"ide &rice
differentials, it is &rofita4le to shi& BNF to .a&an from the U#S# Assuming a U#S# mar%et &rice of VJ &er thousand cu4ic feet, there is
the additional cost of a&&roimately VR#JD to li=uefy, trans&ort and re?gasify at the delivery &oint in .a&anEmore than dou4ling the
&rice# Even so, a healthy &rofit of VR#RD for every thousand cu4ic feet is still generated# *his lucrative o&&ortunity "ill not go
unnoticed 4y Australian, East African and even Canadian natural gas su&&liersEall of "hom have su4stantial natural gas reserves
and are e=ually or 4etter &ositioned logistically to shi& to .a&an than is the U#S# Prices in Euro&e have also remained artificially high
4ecause of )ussiaIs Fa@&rom <F^P: ?'#/7[ mono&oly on natural gas e&orts# !ith the threat of BNF im&orts from the U#S#,
U%raine and other countries, &rices in Euro&e are unli%ely to remain at current levels# Fa@&romIs &i&eline mono&oly is already
under siege from domestic &roducers in )ussia, such as Novate% NX*K#BN mD#7R[ and )osneft, and Statoil S*B#<S ?D#1'[ in
Nor"ay# In short, the eventual synchroni@ation of su&&ly and demand "ill serve to 4oth moderate the
demand for e&orts from the U#S#, as "ell as &ut do"n"ard &ressure on natural gas &rices# In
the same "ay that crude oil has 4ecome a glo4al mar%et, so "ill natural gas# *his "ill come a4out as a
direct result of ne", significant natural gas discoveries and eventual &roduction in Australia, East Africa and &ro4a4ly ChinaE
&erha&s other countries as "ell# *hese countries "ill see% to e&ort their sur&lus, or in the case of China, reduce their need to
im&ort# *a%en as a "hole, these ne" su&&lies "ill serve to %ee& a ca& on U#S# domestic natural?gas
&rices in "hat our research at the University of *eas, San Antonio -as "ell as inde&endent research conducted 4y .ames
$enderson at the <ford Institute for Energy Studies9 estimates "ill eventually 4e in the V/?VR range# *here is
al"ays a tendency to attem&t to &roAect the future in a linear fashion# $o"ever, the develo&ment of shale gas reserves
on a glo4al 4asis more li%ely re&resents a &aradigm shift in the "ay natural gas mar%ets o&erate#
If this is the case, sim&le etra&olations from the recent &ast "ill &rove to 4e inade=uate
forecasting tools# :et this is essentially the a&&roach 4eing ta%en 4y analysts "ho eamine the U#S# natural gas su&&ly mar%et
in isolation# <&&onents of e&orts discount ho" the current de&ressed U#S# &rice levels for natural
gas already a&&ear to 4e acting as a deterrent to future e&loration and &roduction# *his year,
for eam&le, natural gas &roduction in the Eagle Cord Shale area in South *eas has flattened out at roughly
7D'7 out&ut levels -a4out t"o 4illion cu4ic feet &er day9, meaning that there has 4een essentially no
increase in year?over?year &roduction# Fas &roduction in the ;arnett and $aynesville shale fields is similarly muted#
<ver the long haul, mar%et dynamicsE"hich include the a4ility to e&ort "ithout undue uncertainty or restrictionE"ill 4est manage
glo4al su&&ly and demand curves for natural gas# Evidence strongly suggests that limiting e&orts "ill sim&ly have the unintended
effect of also limiting su&&ly#
5lan solves natural gas price volatilityGstable mar"et base
(mead )212 Director of Navigant Consulting, Inc# -)ichard F# Smead, 2Price Insta4ility in the U#S# Natural Fas Industry j
$istorical Pers&ective and <vervie"5 Pre&ared for j *he *as% Corce on Natural Fas Mar%et Sta4ility htt&600"""#cleans%ies#org0"&?
content0u&loads07D''0DH0Intro7NATNFMar%ets#&df9
A# *he ;asic )ole of Natural Fas and the Issue of Xolatility j Cirst, "hat is at sta%e for the nationU ;ased u&on "idely acce&ted
analyses 4y most e&erts, the j United States has availa4le an un&recedented a4undance of natural gas
resource# Bast year>s 4iennialj estimate 4y the Potential Fas Committee &laced the recovera4le resource at a&&roimately 'DD
years> j "orth of current &roduction, "ith some estimates 4eing even higher#j 7j $istory over the &ast decade and j e&ectations for
the future as to the &ace of develo&ment, the gro"th in delivera4ility, are fairly "ideranging, 4ut e=ually ro4ust#j 1j Fiven the
overarching glo4al challenge of car4on>s role in climate change j and the lo"?car4on chemical com&osition of natural gas as
com&ared "ith other fossil fuels, as "ell asj the ongoing concern over U#S# de&endence on foreign sources of crude oil, the
nation>s a4ility to j &roduce natural gas rates a4ove historic levels, at a ra&idly escalating -and
sustained9 &ace, is &otentially j a maAor strategic asset# j $o"ever, such develo&ment faces various
hurdles# *he leading edge, the driving engine of U#S# j natural gas gro"th, es&ecially onshore
"here hurricanes and sensitivity over offshore drilling are notj issues, is the enormous shale gas
resource# j Jj *he sustained develo&ment of this resource re=uires t"o j maAor elements to 4e in &lace6 -'9 the resolution of
various environmental, "ater, and land?accessj issues that attend the drilling and stimulation of the large num4er of "ells involved,j
/j and -79 a sta4le, j sustained and gro"ing consum&tion mar%et that can &roduce &rices sufficient
for the develo&ment#j Rj *his second re=uirement for ro4ust and successful develo&ment of the
U#S# natural gas resource j is seriously undermined 4y a lac% of trust in &rice sta4ility on the &art
of large, very &rice?sensitive j consumers# Consumers such as the chemical industry and
com&etitive &o"er generators have 4een j reluctant to commit to U#S# natural gas 4ecause of the
&erce&tion that natural gas &rices ehi4it j unacce&ta4le volatility# *hese consumers 4ase their
lac% of trust on history, 4oth long?term history and j the very recent 4ehavior of the natural gas
mar%et# Cigure No# ' sho"s a sna&shot of the recent &ricing j at the $enry $u4, the &rimary &rice reference &oint in the U#S#
natural gas industry#j *his is "hat consumers have seen in the industry, a &rice that moved from a range of VR#DD ? j VH#DD &er
million ;tus in 7DD(, as high as V'1#DD in 7DDH, then as lo" as V7#DD in 7DD8# Cor &ricesensitive consumers, such
&rice movement ma%es &lanning etremely difficult, ma%es any degree of j long?term
commitment very ris%y, and generally has made natural gas more of an o&&ortunistic fuel j
source than a 4ase fuel and feedstoc% source if there is another choice#j (j Currently, &rices have recovered
to the VJ#DD to V/#DD range# $o"ever, this then highlights the j other sector that is very dissatisfied "ith natural gas &rice volatility6
&roducers# At VJ#DD to V/#DD, j &roducers have indicated that steady, sustained develo&ment of the nation>s etensive natural gas j
resource is &ro4lematic# At these &rice levels, drilling is currently continuing, 4ut in large &art driven 4y j the re=uirements of
eisting leases and 4y the a4ility to focus only on the 2s"eet5 s&ots in the various j shale gas 4asins#j Hj Additionally, in some 4asins,
the &resence of hydrocar4on li=uids??crude oil, natural j gasoline, etc#??su&&ort the economics of some drilling even "ith inade=uate
natural gas &rices#j 8j In other j "ords, the &roducers are &ic%ing and choosing, 4ased on factors other
than an overall healthy natural j gas mar%et "ith ade=uate, sta4le &rices# j It "ould seem that an
industry "herein 4oth &roducers and consumers are dissatisfied "ith the j un&redicta4ility of
&rice 4ehavior "ould 4e a4le to achieve some meeting of the minds to sta4ili@e j su&&ly?demand
relationshi&s# $o"ever, that has not ha&&ened in the natural gas industryEe=uili4rium j has
a&&arently 4een hard to find# <ne o4Aective of the *as% Corce is to understand the reasons, "hether j those reasons
&ertain in the same degree in the future, and "hat, if anything, might 4e done a4out j them in the &rivate and &u4lic arenas#
Agriculture
5rice instability "ills t$e fertili:er industryGt$at6s "ey to &( agriculture
%+A 3 non&rofit organi@ation created to &romote the interests of manufacturing com&anies for "hich the availa4ility, use and
cost of energy, &o"er or feedstoc% &lay a significant role in their a4ility to com&ete PIndustrial Energy Consumers of America, , .uly
77 7DD1, 2IMPAC* <C *$E U#S# NA*U)AB FAS C)ISIS <N *$E N<)*$ AME)ICAN NI*)<FEN CE)*IBI^E) INDUS*):,5
htt&600"""#ieca?us#com0"&?content0u&loads0D(77D1Certili@er4riefing#&dfQ
Natural gas is the &rinci&al and only economically feasi4le feedstoc% ra" material used for
&roducing anhydrous ammonia, the 4uilding 4loc% &roduct for nitrogen fertili@er# *he fertili@er
industry accounts for a&&roimately three &ercent of the total natural gas consumed in the United States, "hile natural gas costs at
current &rice levels account for nearly 8D &ercent of the cost to &roduce ammonia# Natural gas is the &rimary feedstoc% in the
&roduction of virtually all commercial nitrogen fertili@ers in the United States# It is im&ortant to 4e very clear a4out this6 natural gas
is not sim&ly an energy source for usG it is the ra" material from "hich nitrogen fertili@ers are made# *he &roduction &rocess
involves a catalytic reaction 4et"een elemental nitrogen derived from the air "ith hydrogen derived from natural gas# *he &rimary
&roduct from this reaction is anhydrous ammonia -N$19# Anhydrous ammonia is used directly as a commercial fertili@er or as the
4asic 4uilding 4loc% for &roducing virtually all other forms of nitrogen fertili@ers such as urea, ammonium nitrate and nitrogen
solutions, as "ell as diammonium &hos&hate and mono?ammonium &hos&hate# *he volatility and high level of U#S#
natural gas &rices, virtually un&recedented in the history of our country, has resulted in the
&ermanent closure of almost 7D &ercent of U#S# nitrogen fertili@er ca&acity and the idling of an additional
7/ &ercent# ;y the end of Decem4er 7DDD, the U#S# nitrogen o&erating rate fell to 4elo" (D &ercent of
ca&acity# ;y the end of .anuary 7DD', o&erating rates dro&&ed to an all?time lo" of only JR &ercent# *o &ut this into &ers&ective,
the average U#S# o&erating rate during the '88Ds "as 87 &ercent# During the gas s&i%e in late Ce4ruary and early March of 7DD1,
"or%ing ca&ital re=uirements for one Mid?!estern nitrogen manufacturer to 4uy gas for its o&erations nearly dou4led??an increase
of nearly VJD million in one month# 7 Im&act on U#S# Carmers Natural gas &rices 4egan to steadily increase during calendar year
7DDD, rising from an average of V7#1R &er MM;tu in .anuary to over VR#DD &er MM;tu in Decem4er 7DDD and to a record V'D &er
MM;tu in .anuary 7DD' -Cigure 19# In turn, this forced fertili@er &roduction costs to un&recedented levels# Ammonia &roduction
costs, for eam&le, s&i%ed u& from a&&roimately V'DD &er ton to V'(D &er ton 4y .une 7DDD, to V77D &er ton in Decem4er 7DDD,
and to an average of over V1/D &er ton in .anuary 7DD'# *he shar& rise in natural gas &rices and the resulting curtailment of U#S#
fertili@er &roduction also has had a dramatic im&act on fertili@er &rices throughout the mar%eting chain and, in &articular, at the
farm level# Nitrogen &rices at the farm level, for eam&le, Aum&ed this year to near?record high levels# According to U#S# De&artment
of Agriculture data, the U#S# average farm?level &rice for ammonia Aum&ed this s&ring to V1(1 &er ton com&ared to an average s&ring
&rice last year of V7/D# Similarly, urea &rices have clim4ed from V'8' to V7R' and UAN &rices from V'7( to V'R' in the same time
&eriod# *his translates into an increase in cost to a ty&ical Mid"est corn farmer of V'D to V'/ &er acre# It is im&ortant to understand
that most U#S# nitrogen fertili@er is consumed "ithin a very short time frame in the fall and s&ring a&&lication seasons# During the
'88Ds, a&&roimately (D?(/ &ercent of the nitrogen fertili@ers consumed 4y American farmers "as su&&lied 4y domestic &roduction
"ith another '/ &ercent su&&lied from near4y Canadian &lants# *he remaining 'D?'/ &ercent of the volume "as sourced from
offshore su&&liers# *he continued consolidation in the industry due to high energy costs and other critical factors is also im&acting
the farm in&ut retail dealer sector# A&&roimately 'H &ercent of the largest farming o&erations in the country currently use HD
&ercent of the in&uts# *here are currently 'D,/DD retail in&ut outlets in America today# ;ut the num4er of retail com&anies, "hich
oversee these facilities, has dro&&ed almost J/ &ercent from the more than R,DDD in '88/ to Aust 1,JDD in 7DD7#1 .o4s and the
Economy Since mid?7DDD, "hen the natural gas crisis 4egan to manifest itself, '' ammonia &lants re&resenting 7' &ercent of U#S#
ca&acity have 4een &ermanently closed# *he United States lost these Ao4s and this industrial out&ut, in essence sending them
overseas# *his lost ca&acity "as re&laced 4y im&orted materials from regions that have ine&ensive natural gas su&&lies, including
the Middle East, the Cormer Soviet Union, *rinidad and Xene@uela# <f the 7D million tons of ammonia ca&acity that eisted in the
United States &rior to 7DDD, a&&roimately 1#/ million tons have already 4een &ermanently closed# According to a recent study
com&leted 4y Certecon, the "orld>s largest fertili@er consulting com&any, another four million tons is at ris% of closing "ithin the
net t"o years# In addition, it is antici&ated that the remainder of the North American nitrogen
industry "ill li%ely o&erate on a 2s"ing 4asis#5 Due to the current volatile natural gas mar%ets,
the industry has suffered through four years of etreme financial hardshi&# *"o maAor U#S#
&roducers have filed for 4an%ru&tcy# In .une 7DD1, only /D &ercent of remaining industry ca&acity "as o&erating#
!or%ers have 4een laid off, and more &ermanent &lant closures may 4e inevita4le# *his "ill increase the de&endence of the U#S#
farmer and industrial consumer on foreign sources of nitrogen fertili@er su&&ly# Ultimately, this &uts in Aeo&ardy our nation>s food
security, and 4y etension, our national security# *he level of attrition in the North American fertili@er
industry in the &ast t"o decades is staggering and is 4eing accelerated 4y increased natural gas
costs and shutdo"ns of domestic &roduction# *here "ere R1 entitities o"ning domestic anhydrous ammonia
&roduction in the '8(Ds, no" do"n to 77 in the early 7DDDs# <f the H7 cor&orate entities &roducing domestic nitrogen in the '8RDs
and '8(Ds, only '7 are currently &roducing &roduct#J Cor eam&le, a "orld?scale nitrogen &roduction facility in Donaldsonville,
Bouisiana, currently em&loys /D( full?time and contract "or%ers# *his facility accounts for VJR million a year in "ages and VH
million in sales and &ro&erty taes# During a normal &roduction year, the facility converts a&&roimately (H million MM;tu of
natural gas into 7#7/ million tons of ammonia, '#(/ million tons of urea, and 7#'/ million tons of UAN# *he com&le has a daily
re=uirement of over 7DD million cu4ic feet of natural gas as a feedstoc% and fuel# Domestic fertili@er manufacturing facilities such as
the one noted a4ove have historically &rovided to&?&aying Ao4s and additional em&loyment o&&ortunities in local communities#
According to a recent ;aton )ouge Advocate article, Ao4s in chemical manufacturing are at the to& of the &ay scale among Bouisiana
manufacturers# *he average chemical industry "age in Ce4ruary "as V7/#71 &er hour, "ith a JJ#7?hour "or%"ee% &roducing V',''/
&er "or%er &er "ee%, com&ared to a general manufacturing "age of V'(#R1 &er hour or V(/R on a J7#8?hour "or%"ee%# Chemical
industry Ao4s also have a high multi&lier effect# In East ;aton )ouge Parish, for eam&le, each chemical Ao4 is estimated to su&&ort
another J#R &ositions in the overall Ao4 mar%et# Eam&les of .o4 Bosses and Bayoffs As re&orted in the .une 1D, 7DD1, Freen
Mar%ets, *erra Industries Inc# due to not 4eing a4le to cover its cash costs 4ecause of continuing high natural gas costs said it "ould
shut do"n ammonia and urea &roduction at its ;lytheville, Ar%ansas, nitrogen com&le 4y the end of .une, resulting in the lay?off of
RD em&loyees, "hich re&resents R/ &ercent of that facility>s "or%force# As re&orted in the .une 71, 7DD1, Freen Mar%ets,
PotashCor& and Mississi&&i Chemical Cor& 4egan layoffs at its Mem&his, *enn#, and Feismer, Ba#, &roduction facilities, res&ectively#
A com4ined '8D em&loyees are im&acted at the t"o &lants# / As re&orted in the A&ril 7H, 7DD1, Freen Mar%ets, Agrium Inc# told
em&loyees at its Kenai, Alas%a, nitrogen facility A&ril 7J that it "ould 4e laying off R/ "or%ers due to restructuring as a result of
reduced natural gas su&&lies# As re&orted in the March 'D, 7DD1, Freen Mar%ets, IMC Flo4al eliminated a total of 'DD &ositions in a
move to cut costs due to current conditions in the de&ressed "orld fertili@er mar%et#R Policy )ecommendations $igh natural
gas &rices &resent the most serious threat to the fertili@er sector and to farmers in general, since
the energy shoc%s of the '8(Ds# *he fertili@er industry 4elieves it is im&erative that the U#S#
develo& a com&rehensive and 4alanced energy &olicy O one that encourages the develo&ment of
additional su&&lies and, at the same time, &romotes the efficient use of a variety of energy sources and
technologies# *he fertili@er industry 4elieves that a 4alanced and com&rehensive energy &olicy is
not only long overdue, 4ut also essential to the long?term via4ility of this strategic sector# It is also
crucial to the American farmer given that almost one?third of U#S# cro& &roduction is derived from nitrogen fertili@er# If
"e are to &revent further decimation of the North American nitrogen fertili@er industry, the U#S#
government must enact &olicies that sta4ili@e the su&&ly0demand 4alance for natural gas#
&( agriculture and food production is critical to prevent world food wars
4ugar )222 -)ichard, Chairman of the Senator Coreign )elations Committee and
Mem4er0Cormer Chair of the Senate Agriculture Committee, 2Plant &o"er5
htt&600"""#une&#org0<urPlanet0imgversn0'J10lugar#html9
In a "orld confronted 4y glo4al terrorism, turmoil in the Middle East, 4urgeoning nuclear
threats and other crises, it is easy to lose sight of the long?range challenges# ;ut "e do so at our &eril# <ne of the most
daunting of them is meeting the "orld>s need for food and energy in this century# At sta%e is not only
&reventing starvation and saving the environment, 4ut also "orld &eace and security# $istory tells us that
states may go to "ar over access to resources, and that &overty and famine have often 4red fanaticism
and terrorism# !or%ing to feed the "orld "ill minimi@e factors that contri4ute to glo4al
insta4ility and the &roliferation of "ea&ons of mass destruction# !ith the "orld &o&ulation
e&ected to gro" from R 4illion &eo&le today to 8 4illion 4y mid?century, the demand for
afforda4le food "ill increase "ell 4eyond current international &roduction levels# Peo&le in ra&idly
develo&ing nations "ill have the means greatly to im&rove their standard of living and caloric inta%e# Inevita4ly, that means eating
more meat# *his "ill raise demand for feed grain at the same time that the gro"ing "orld &o&ulation "ill need vastly more 4asic
food to eat# Com&licating a solution to this &ro4lem is a dynamic that must 4e 4etter understood in the !est6 develo&ing
countries often use limited ara4le land to e&and cities to house their gro"ing &o&ulations# As
good land disa&&ears, &eo&le destroy tim4er resources and even rainforests as they try to create
more ara4le land to feed themselves# *he long?term environmental conse=uences could 4e
disastrous for the entire glo4e# Productivity revolution *o meet the e&ected demand for food over the
net /D years, "e in the United States "ill have to gro" roughly three times more food on the
land "e have# *hat>s a tall order# My farm in Marion County, Indiana, for eam&le, yields on average H#1 to H#R tonnes of
corn &er hectare O ty&ical for a farm in central Indiana# *o tri&le our &roduction 4y 7D/D, "e "ill have to &roduce an annual average
of 7/ tonnes &er hectare# Can "e &ossi4ly 4oost out&ut that muchU !ell, it>s 4een done 4efore# Advances in the use
of fertili@er and "ater, im&roved machinery and 4etter tilling techni=ues com4ined to generate a threefold increase in yields
since '81/ O on our farm 4ac% then, my dad &roduced 7#H to 1 tonnes &er hectare# Much US agriculture has seen similar increases#
;ut of course there is no guarantee that "e can achieve those results again# Fiven the urgency of e&anding food &roduction to meet
"orld demand, "e must invest much more in scientific research and target that money to"ard &roAects that &romise to have
significant national and glo4al im&act# Cor the United States, that "ill mean a maAor shift in the "ay "e conduct and fund
agricultural science# Cundamental research "ill generate the innovations that "ill 4e necessary to feed the "orld#
+$emical industry
/atural 7as volatility "ills t$e c$emical industry
(tones E -Ed"ard, Director of Energy )is% Do" Chemical Com&any in a &resentation to the
Committee on Energy and Natural )esources, 2*he )ole of Natural Fas in Mitigating Climate
Change5 'D07H08 htt&600"""#energy#senate#gov0&u4lic0inde#cfm0files0serveU
CileTidZ84(H((4R?eR'R?(Rf'?1/'1?Dc1feJcda/'J9
W$en it comes to natural gas and climate &olicy, Do" favors policies t$at will avoid the j demand
destruction that occurs in natural gas price spi"es, along wit$ policies t$at will j allow t$e &(
to use all of its low#carbon resources' (uc$ policies will maintain industrial j
competitiveness' j Do" also 4elieves that t$e &( needs a sustainable energy policy' Climate
change is an j im&ortant com&onent of a sustaina4le energy &olicy, 4ut it is not the only &art# We $ave j develo&ed a list of
s&ecific recommendations t$at, if im&lemented, "ould form the 4asis j of a sustaina4le energy &olicy# j Cirst,
aggressively &romote the cleanest, most relia4le, and most afforda4le 2fuel5E energy efficiency# Energy efficiency is the consensus
solution to advance energy security, j reduce F$Fs, and %ee& energy &rices lo"# It is often undera&&reciated for its value# <f j
&articular im&ortance is im&roving the energy efficiency of 4uildings# ;uildings are res&onsi4le for 1H[ of C<7 emissions, JD[ of
energy use, and (D[ of electricity use# A j com4ination of federal incentives and local energy efficiency 4uilding codes is needed# j
Second, increase and diversify domestic energy supplies, including natural gas# Nuclear j energy
and clean coal "ith car4on ca&ture and se=uestration -CCS9 should 4e &art of the j solution, as should solar, wind, 4iomass,
and ot$er renewable energy sources# !e 4elieve a &rice on car4on "ill advantage natural gas, and further
incentives "ould only j dangerously increase inelastic demand# *herefore, Congress should not &rovide free allo"ances or other
incentive &ayments for the &ur&ose of &romoting fuel s"itching from j coal to natural gas in the &o"er sector# j An estimated HR
4illion 4arrels of oil and J7D trillion cu4ic feet of natural gas are not 4eing ta&&ed# $istory suggests that the more "e e&lore, the
more "e %no", and the more j our estimates of resources gro"# EIA has said that 2the estimate of ultimate recovery increases over
time for most reservoirs, the vast maAority of fields, all regions, all countries, j and the "orld#5 And "e have the technology that
allo"s us to &roduce 4oth oil and natural gas in an entirely safe and environmentally sound manner# Any ne" fossil energy resources
must 4e used as efficiently as &ossi4le# <ne "ay to maimi@e the transformational value of increased oil and gas &roduction is to j
share the royalty revenue "ith coastal states and use the federal share to hel& j fund research, develo&ment and de&loyment in such
areas as energy efficiency and rene"a4le energy# Production of oil and gas on federal lands has 4rought 4illions of dollars j of
revenue into state and federal treasuries# E&anding access could &ut 4illions of additional dollars into state and federal 4udgets# j j
*hird, act 4oldly on technology &olicy through long?term ta credits, and increased investment in )_D and de&loyment# *hese are
costly 4ut necessary to &rovide the certainty that the 4usiness community needs to s&ur investment# !e didn>t res&ond to S&utni%
"ith half?measures# !e can>t afford to res&ond to our energy challenges "ith halfmeasures, either# j Courth, em&loy mar%et
mechanisms to address climate change in the most cost?effective j "ay# *here is a need for direct action no" to slo", sto&, and then
reverse the gro"th of j greenhouse gas levels in the atmos&here# !e concur "ith the &rinci&les and recommendations of the US
Climate Action Partnershi& -USCAP9, of "hich Do" is a &roud mem4er# And "e recogni@e that concerted action is needed 4y the rest
of the "orld to ade=uately address this glo4al &ro4lem# Particular attention must 4e &aid to cost containment and the availa4ility of
offsets -and international offsets9# Also, climate &olicy j should not &enali@e the use of fossil energy as a feedstoc% material to ma%e
&roducts that j are not intended to 4e used as a fuel# j To minimi:e t$e downsides of natural gas price
volatility, +ongress s$ould adopt policies j to increase t$e number of elastic users
of natural gas, and consider &olicies to increase US j su&&ly of natural gas# A resilient natural gas mar"et
would empower &( manufacturers j to create $ig$ value ;obs as they did from '8H1?'88R, during
"hich &eriod US industrial j gas use gre" at an average rate of 7#([0yr# In the event "eather increases natural gas j demand, &rice
sensitive e&orts "ould 4e tem&orarily reduced, re4alancing the natural j gas mar%et "ith less disru&tion# &nder t$is
scenario, price spi"es won6t be as severe, and j won6t cause as muc$ $arm w$en
t$ey occur, w$ic$ is ultimately good for bot$ industry j and all consumers' j &nder
t$is scenario we can envision a circumstance in w$ic$ t$e c$emical industry is j
once again able to preferentially invest in t$e &(' j Conclusion j /atural gas will play a
critical role in US climate &olicy# &( manufacturing ;obs are j closely lin"ed to natural gas
price and price volatility' T$e policy c$oices +ongress will j ma"e on natural gas
are t$erefore critical to &( manufacturers' !ithout industrial gas j users, any disru&tion in su&&ly or
demand must 4e met 4y dramatic &rice changes# j Energy efficiency should 4ecome a national &riority# +ongress s$ould
enact legislation j to create a sustainable energy supply based on all sources of
domestic energy, including j nuclear energy# *echnology &olicy should create &o"erful incentives for clean energy j
technologies, such as CCS# A &rice on car4on, cou&led "ith a&&ro&riate cost contain?ment measures, "ould 4e a large and sufficient
incentive to &romote US natural gas demand, "hich is already gro"ing even in the a4sence of a &rice on car4on# j *here is no one
silver 4ullet solution to our energy and climate &ro4lems# All Americans j paid a $ig$ price for over#
reliance on natural gas in t$e last ten years' 0ur country cannot j afford to repeat
t$at mista"e' T$is time we must fas$ion a compre$ensive energy policy j w$ic$
addresses supply and demand realities, and environmental, security and economic
j goals to ensure energy costs in t$e &( remain globally competitive and avoid
economically devastating volatility'
+$emical industry is "ey to solving everyt$ing from disease to environmental
collapse 3 prevents extinction
-aum EE O editor?in?chief of the American Chemical SocietyIs Chemical and Engineering
Ne"s P)udy M# ;aum, C_E Ne"s, 2Millennium S&ecial )e&ort,5 '7?R?88,
htt&600&u4s#acs#org0hotartcl0cenear088'7DR0((J8s&intro7#htmlQ 00 BDK
*he &ace of change in todayIs "orld is truly incom&rehensi4le# (cience is advancing on all fronts, particularly
c$emistry and biology wor"ing toget$er as t$ey never $ave before to understand
life in general and $uman beings in particular at a breat$ta"ing pace' *echnology ranging
from com&uters and the Internet to medical devices to genetic engineering to nanotechnology is transforming our "orld and our eistence in it# It is, in
fact, a foolIs mission to &redict "here science and technology "ill ta%e us in the coming decade, let alone the coming century# !e can say "ith finality
only this6 !e donIt %no"# !e do %no", ho"ever, that we face enormous c$allenges, "e R 4illion humans "ho no" inha4it
Earth# In its '88H revision of "orld &o&ulation estimates and &roAections, t$e &nited /ations anticipates a world
population in )2S2 of 9'3 billion to 12'9 billion, "ith a Wmedium?fertility &roAection,W considered the most li%ely,
indicating a "orld &o&ulation of H#8 4illion &eo&le in 7D/D# According to the UN, fertility no" stands at 7#( 4irths &er "oman, do"n from / 4irths &er
"oman in the early '8/Ds# And fertility rates are declining in all regions of the "orld# *hatIs good ne"s# ;ut &eo&le are living a lot longer# *hat is
certainly good ne"s for the individuals "ho are living longer, 4ut it also &oses challenges for health care and social services the "orld over# *he '88H
UN re&ort estimates for the first time the num4er of octogenarians, nonagenarians, and centenarians living today and &roAected for 7D/D# *he num4ers
are startling# In '88H, RR million &eo&le "ere aged HD or older, a4out one of every 'DD &ersons# *hat num4er is e&ected to increase sifold 4y 7D/D to
reach 1(D million &eo&le, or one in every 7J &ersons# ;y 7D/D, more than 7#7 million &eo&le "ill 4e 'DD years old or older\ *ere is t$e
fundamental c$allenge we faceA T$e worldIs growing and aging population must be
fed and clot$ed and $oused and transported in ways t$at do not perpetuate t$e
environmental devastation wroug$t by t$e first waves of industriali:ation of the '8th and
7Dth centuries# As "e increase our out&ut of goods and services, as "e increase our consum&tion of energy, as "e meet the im&erative of raising the
standard of living for the &oorest among us, "e must learn to carry out our economic activities sustaina4ly# *here are o&timists out there, C_EN
readers among them, "ho 4elieve that the history of civili@ation is a long string of technological trium&hs of humans over the limits of nature# In this
vie", the idea of a Wcarrying ca&acityW for EarthEa limit to the num4er of humans EarthIs resources can su&&ortEis a fiction 4ecause technological
advances "ill continuously o4viate &reviously &erceived limits# *his vie" has historical merit# Dire &redictions made in the '8RDs a4out the ehaustion
of resources ranging from &etroleum to chromium to fresh "ater 4y the end of the '8HDs or '88Ds have &roven utterly "rong#
!hile I do not count myself as one of the technological &essimists "ho see technology as a mied 4lessing at 4est and an unmitigated evil at "orst, I do
not count myself among the technological o&timists either# T$ere are environmental c$allenges of
transcendent complexity t$at % fear may overcome us and our art$ before
tec$nological progress can come to our rescue' 7lobal climate c$ange, t$e
accelerating destruction of terrestrial and oceanic $abitats, t$e catastrop$ic loss
of species across t$e plant and animal "ingdomsGt$ese are problems t$at are not
obviously amenable to straig$tforward tec$nological solutions' -ut % "now t$is,
tooA (cience and tec$nology $ave broug$t us to w$ere we are, and only science and
tec$nology, coupled wit$ innovative social and economic t$in"ing, can ta"e us to
w$ere we need to be in t$e coming millennium # Chemists, c$emistry, and t$e c$emical
industryE"hat "e at C_EN call the chemical enter&riseEwill play central roles in addressing t$ese
c$allenges' *he first section of this S&ecial )e&ort is a series called WMillennial MusingsW in "hich a "ide variety of re&resentatives from the
chemical enter&rise share their thoughts a4out the future of our science and industry# *he five essays that follo" e&lore t$e
contributions t$e c$emical enterprise is ma"ing rig$t now to ensure t$at we will
successfully meet t$e c$allenges of t$e )1st century' *he essays do not attem&t to &redict the future# *a%en
as a "hole, they do not &retend to 4e a com&rehensive eamination of the efforts of our science and our industry to tac%le the challenges IIve outlined
a4ove# )ather, they &aint, in 4road 4rush stro%es, a &ortrait of scientists, engineers, and 4usiness managers struggling to ma%e a vital contri4ution to
humanityIs future# *he first essay, 4y Senior Editor Marc S# )eisch, is a case study of the chemical industryIs ongoing transformation to sustaina4le
&roduction# Although it is not "ell %no"n to the general &u4lic, t$e c$emical industry is at t$e forefront of
corporate efforts to reduce waste from production streams to :ero' Industry giants DuPont and
Do" Chemical are ta%ing maAor strides "orld"ide to manufacture chemicals "hile minimi@ing the environmental Wfoot&rintW of their facilities# *his is
an ethic that starts at the to& of cor&orate structure# Indeed, )eisch =uotes Do" President and Chief Eecutive <fficer !illiam S# Stavro&olous6 W!e
must integrate elements that historically have 4een seen as at odds "ith one another6 the tri&le 4ottom line of sustaina4ilityEeconomic and social and
environmental needs#W DuPont Chairman and CE< Charles -Chad9 <# $olliday envisions a future in "hich W4iological &rocesses use rene"a4le
resources as feedstoc%s, use solar energy to drive gro"th, a4sor4 car4on dioide from the atmos&here, use lo"?tem&erature and lo"?&ressure
&rocesses, and &roduce "aste that is less toic#W ;ut sustaina4ility is more than Aust a &hiloso&hy at these t"o chemical com&anies# )eisch descri4es
ongoing Do" and DuPont initiatives that are ma%ing sustaina4ility a reality at Do" facilities in Michigan and Fermany and at DuPontIs massive &lant
site near )ichmond, Xa# Anot$er manifestation of t$e c$emical industryIs evolution is its
embrace of life sciences' Fenetic engineering is a revolutionary technology# In the '8(Ds, research advances fundamentally shifted
our &erce&tion of DNA# !hile it had al"ays 4een clear that deoyri4onucleic acid "as a chemical, it "as not a chemical that could 4e mani&ulated li%e
other chemicalsEcli&&ed &recisely, altered, stitched 4ac% together again into a functioning molecule# )ecom4inant DNA techni=ues 4egan the
transformation of DNA into Aust such a chemical, and the rever4erations of that change are li%ely to 4e felt "ell into the net century# Fenetic
engineering has entered the fa4ric of modern science and technology# It is one of the 4asic tools chemists and 4iologists use to understand life at the
molecular level# %t provides new avenues to p$armaceuticals and new approac$es to treat
disease' %t expands enormously agronomistsI ability to introduce traits into crops,
a capability sei:ed on by numerous c$emical companies# *here is no dou4t that this &o"erful ne" tool
"ill &lay a maAor role in feeding the "orldIs &o&ulation in the coming century, 4ut its ado&tion has hit some 4um&s in the road# In the second essay,
Editor?at?Barge Michael $eylin eamines ho" the &romise of agricultural 4iotechnology has gotten tangled u& in real &u4lic fear of genetic
mani&ulation and cor&orate control over food#
Manufacturing
(table low prices are "ey to revitali:e manufacturing industry
T$omas 1) P.ason M#, Director of )esearch, *he Carlyle Frou&, 2Chea& Natural Fas and U#S# )eindustriali@ation5
htt&600"""#carlyle#com0sites0default0files0A&ril[7D7D'7[7D?[7DChea&[7DNatural[7DFas[7Dand[7DU#S#
[7D)eindustriali@ation#&dfQ
At Aust over V7 &er million ;ritish *hermal Units -;*Us9, natural gas seems ece&tionally chea&# *he &rice of j natural gas
colla&sed along "ith the &rice of oil in the de&ths of the Freat )ecession# Unli%e oil, "hich has j since
recovered more than RD[ of its &ea%?to?trough &rice decline, the &rice of natural gas has continued to j fall#
Natural gas is no" so ine&ensive that its &rice could increase five?fold from current levels and
still 4e j undervalued relative to oil on an energy content e=uivalent 4asis# Although the o4vious
im&lication is that j an investor should 4uy natural gas and short oil futures, these &roductive commodities are not
financial j assets governed 4y ar4itrage arguments# *he mis&ricing has already j dee&ened
4eyond levels most o4servers thought &ossi4le and j continues to gro"# j It has 4een said that the 4est
2cure5 for lo" commodity &rices is lo" j commodity &rices# *hat is to say, natural gas &rices are
so lo" that j 4urning natural gas should 4e etremely attractive to utilities and, j more
im&ortantly, energy?intensive 4usinesses# Chea& gas increases j the e&ected return on
investments in activities li%e manufacturingj and mining, "hich generates demand for additional &i&elines and
j other ty&es of energy infrastructure# *he 4est "ay to &rofit from lo" natural gas &rices in the near term
may j 4e through investments in an American 2reindustriali@ation5 4ased on energy?intensive
economic activityj that can 4est e&loit the economic "indfall from chea& gas#
T$at puts a cap on conflict
06*anlon 1) -Michael, Director of )esearch and Senior Cello" O ;roo%ings Institution, 2*he Arsenal of Democracy and $o"
to Preserve It6 Key Issues in Defense Industrial Policy .anuary 7D'75,
htt&600"""#4roo%ings#edu0e0media0research0files0&a&ers07D'70'07R[7Ddefense[7Dindustrial
[7D4ase0D'7RTdefenseTindustrialT4aseTohanlon9
*he current "ave of defense cuts is also different than &ast defense 4udget reductions in their li%ely industrial im&act, as the U#S#
defense industrial 4ase is in a much different &lace than it "as in the &ast# Defense industrial issues are too often vie"ed through the
lens of Ao4s and &et &roAects to &rotect in congressional districts# ;ut the overall health of the firms that su&&ly the
technologies our armed forces utili@e does have national security resonance # 3ualitative su&eriority in
"ea&onry and other %ey military technology has 4ecome an essential element of American military &o"er
in the modern eraEnot only for "inning "ars 4ut for deterring them # T$at re!uires world#class
scientific and manufacturing capabilitiesG w$ic$ in turn can also generate civilian and military
export opportunities for the United States in a glo4ali@ed mar%et&lace#
)ac atA xo cp
xecutive action over T*A still go t$roug$ congress
(& 1) "e4site dedicated to energy &olicy -Smart Energy Universe, 2U#S#?Meico *rans4oundary $ydrocar4ons Agreement5, 7D'7,
htt&600"""#smartenergyuniverse#com0regulatory?u&date0'1D((?u?s?meico?trans4oundary?hydrocar4ons?agreement9 00K:
***note *;AZ *rans4oundary $ydrocar4ons Agreement
It is "idely ac%no"ledged in 4oth ca&itals that the *;A negotiations moved =uic%ly in order to 4e com&leted
in time for the ratification in Meico &rior to 7D'7 Congressional elections# ;oth PAN and P)I &olitical leaders used their
influence to gain su&&ort for the *;A, "hich the Meican Senate ratified# In the United States, the *;A stalled
"ithin the <4ama administration des&ite su&&ort 4y %ey officials in the De&artments of State and Interior# Prior to
com&leting the agreement, the De&artments of State and Interior &artici&ated in Senate Coreign )elations Committee 4riefings to
discuss status of the negotiationsG ho"ever, there "as no consultation on s&ecific tet# An eecutive agreement "ould
not re=uire the t"o?thirds vote necessitated 4y a treaty, 4ut instead it "ould 4e a&&roved in the
same form as a statute, re=uiring &assage 4y maAority in 4oth the Senate and the $ouse of
)e&resentatives# Begislation a&&roving the agreement, necessary im&lementing authorities, and clarifications regarding
certain &rovisions of the *;A could 4e su4Aect to amendment, including 4y items unrelated to the *;A itself, thus
&ossi4ly miring the *;A in other &olitical fights#
+ongress is "ey to effective implementation
-rown and Meac$am PKSK13 &olitical insiders -Neil ;ro"n and Carl Meacham, DR0D/0'1 2 *ime for US?Meico
*rans4oundary Agreement5 htt&600thehill#com0o&inion0o&?ed01D1(18?time?for?us?meico?trans4oundary?
agreement`i@@7a^@Sns*K9 00K:
Fiven the foreign &olicy, energy security, and environmental 4enefits of the *;A signed in Ce4ruary 7D'7, it is disa&&ointing that the
<4ama administration has delayed ta%ing ste&s necessary for Congress to a&&rove the agreement# *hat
delay does not ma%e it any less im&ortant for Congress to a&&rove the agreement soon# Congress has a critical role in
clarifying certain &rovisions of this international agreeme nt# Dis&ute resolution mechanisms "arrant
&articular attention# Already, it has 4een mista%enly argued that the *;A re=uires greater secrecy in
&ayments of oil deals, encouraging an effort to eem&t the agreement from the Cardin?Bugar trans&arency la"# No such
secrecy is re=uired 4y the *;A, "hich su4ordinates its confidentiality rules to domestic la"# *he longer the *;A sits on
the shelf, the more li%ely it "ill 4e hamstrung as a &roy for more rancorous energy dis&utes# Prom&t Congressional
activity could 4e a useful vote of confidence in the u&coming domestic energy sector reform in
Meico# Meico needs ne" oil &roduction from more com&le fields to counter4alance its declining fields, let alone increased
&roduction# Beaders in Meico>s t"o largest &olitical &arties %no" that under current ca&ital and management constraints, PEMEL
alone is etremely unli%ely to turn Meico>s oil and natural gas a4undance into &ros&erity for the Meican &eo&le# International oil
maAors are needed, 4ut that "ill ta%e &olitical courage# Congressional a&&roval of the *;A "ould tangi4ly
demonstrate that the U#S# government and our com&anies are "illing &artners# *hat is good for Meico and for the
U#S#
)ac atA unilateral drilling
.oesn6t solve 5M? liberali:ation and "ills relations
+,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E
*)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*?
''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM
Second, it is unli%ely that the U#S# maritime 4order areas "ould 4e develo&ed "ithout the *;A, "hereas a PEMEL official indicated
desire to 4egin e&loration on the Meican side of the 4order# Potential U#S# o&&onents of the *;A may argue that given
PEMELIs limited a4ility to e&lore in dee& "ater, the real effect of the *;A "ill 4e to reduce I<CsI com&etitive
advantages# In other "ords, the o&&osition argument could state, the U#S# should sim&ly move for"ard
"ith e&loration since our com&anies have the ca&ital and technology to move more =uic%ly than PEMEL# *hat criticism
neglects the reality that, over the long?term, the I<Cs have a greater interest in investing throughout
Meican territory than they do in a sliver of U#S# area along the maritime 4order # *herefore,
those I<Cs "ould not ris% enraging the Meican government 4y , &otentially, draining Meican
resources from U#S# territory# *hus, U#S# interests in increased safe and secure domestic oil &roduction along the 4order "ill 4e
4est met "ith the *;A#

***/7
/atural 7as xports .isad
1nc russia econ
7ulf of Mexico natural gas production decreasing
%A, 13 -EIA, R07D0'1, 2Natural gas &roduction declines in the F<M strong on the mainland5,
htt&600"""#cattlenet"or%#com0cattle?ne"s07'77'7(H'#html900EM
Natural gas mar%eted &roduction is &roAected to increase from R8#7 ;cf0d in 7D'7 to (D#D ;cf0d in 7D'1, and to (D#J ;cf0d in 7D'J#
<nshore &roduction increases over the forecast &eriod, "hile federal Fulf of Meico &roduction declines# Natural gas
&i&eline gross im&orts, "hich have fallen over the &ast five years, are &roAected to remain near their 7D'7 level over the forecast#
BNF im&orts are e&ected to remain at minimal levels of around D#J ;cf0d in 4oth 7D'1 and 7D'J# MeicoIs domestic natural gas
consum&tion is rising faster than domestic &roduction, leading to 4oth record &i&eline gas im&orts from the United States and
gro"th in the countryIs im&orts of li=uefied natural gas -BNF9# Natural gas trade 4et"een Meico and the United States has 4een
gro"ingG daily net e&orts from the United States to Meico so far in 7D'1 -.anuary '?May R9 are estimated to average '#R 4illion
cu4ic feet &er day -;cf0d9, u& almost 78 &ercent over the same &eriod in 7D'7# *he N<AA Atlantic $urricane Season <utloo%
&redicts that the Atlantic ;asin li%ely "ill e&erience a4ove?normal tro&ical "eather activity during the current hurricane season#
EIA estimates that the median outcome for shut?in natural gas &roduction in the federally administered
Fulf of Meico as a result of disru&tions during the 7D'1 hurricane season is JR ;cf -see the 7D'1 <utloo% for $urricane?
)elated Production <utages in the Fulf of Meico9# EIAIs simulation results indicate a /H?&ercent &ro4a4ility of offshore natural gas
&roduction e&eriencing outages during the current hurricane season that are e=ual to or larger than the 17 ;cf of &roduction shut in
during the 7D'7 hurricane season#
5lan increases natural gas exports
(now, 13 -Nic% Sno", R0(0'1,2!itnesses descri4e 4enefits from e&anding <CS activity5,
htt&600"""#ogA#com0articles07D'10DR0"itnesses?descri4e?4enefits?from?e&anding?ocs?
activity#html900EM
E&anded oil and gas activity on the US <uter Continental Shelf "ould &roduce su4stantial economic and
energy security 4enefits, three "itnesses told a US $ouse Natural )esources su4committee# ;ut a fourth "itness said
alternative energy and other offshore industries should also 4e allo"ed to gro"# Most of the "itnesses at the Energy and Minerals
Su4committee>s .une R hearing a&&lauded the goals of $) 771', "hich US )e&# Doc $astings -)?!ash#9, the full committee>s
chairman, introduced on .une J# *he measure "ould e&and federal offshore oil and gas leasing 4eyond areas that are &art of the
7D'7?'( <CS &rogram# 2It "ould safely o&en u& ne" areas that "ere &reviously under moratoriaEsuch as
the Mid?Atlantic, Southern Pacific, and Arctic,5 $astings said in his o&ening statement# 2*his "ould create over a million ne"
American Ao4s and generate hundreds of millions of dollars in ne" revenue to the federal treasury#5 .ohn C# Celmy, American
Petroleum Institute chief economist, testified, 2If offshore energy &roduction "ere etended to ne" areas, it could generate a 4ounty
of Ao4 creation and ne" revenues to the government "hile im&roving America>s energy security#5 $e added, 2Earlier this year, a
single lease sale in the Fulf of Meico generated V'#7 4illion in revenue for the federal government# As "ells are drilled and the
leases 4egin to &roduce, the revenue im&act "ill only gro", along "ith the &ros&ects for em&loyment in the region and around the
country#5 Christo&her Fuith, vice?&resident for &olicy at the US Cham4er of Commerce>s Institute for 7'st Century Energy, said in
his "ritten statement that $) 771' is necessary 4ecause more than HR[ of the US <CS is &resently off?limits to oil and gas activity#
Systematic increase 2;y increasing access to the <CS and esta4lishing long?term &roduction targets for the PUSp De&artment of the
Interior to &lan around "hen formulating oil and gas leasing &rograms, the country can 4egin to systematically
increase its energy security and rea& the economic 4enefits that entails,5 Fuith suggested in his "ritten testimony#
%ncreased natural gas exports displaces Russia, crus$ing t$eir economy
Ratner, 13 S&ecialist in Energy Policy -Michael )atner, J0H0'1, 2U#S# Natural Fas E&orts6
Ne" <&&ortunities, Uncertain <utcomes5, htt&600"""#fas#org0sg&0crs0misc0)J7D(J#&df900EM
Many of the &roAected &roAects in Cigure / are targeting the Asian BNF demand centers# Although the locations of most of
the &ro&osed U#S# e&ort terminals are on the U#S# Fulf Coast and the East Coast, Asia may 4e the
target mar%et for U#S# BNF as it tends to &ay higher &rices for its natural gas im&orts# *he "idening of the Panama
Canal, scheduled to 4e com&leted in 7D'/, "ould contri4ute to U#S# com&etitiveness in Asia#
Euro&e has a lot of BNF im&ort ca&acity U#S# Natural Fas E&orts6 Ne" <&&ortunities, Uncertain <utcomes Congressional )esearch
Service '7 and gro"ing demand, 4ut needs to continue to im&rove its infrastructure connections to trans&ort gas to mar%ets#'H
)ussia, the main su&&lier of natural gas to Euro&e, may 4e &ut under increasing &ressure 4y
U#S# e&ort &roAects to further delin% its natural gas &rices from oil# U#S# BNF e&orts could also &rovide
o&tions for some countries that are highly de&endent on one su&&lier
T$at decimates t$e Russian economy
Weit:, 11 senior fello" at the $udson Institute and a !orld Politics )evie" senior editor
-)ichard !eit@, Novem4er 7D'', 2Can !e Manage a Declining )ussiaU5,
htt&600"""#aei#org0files07D''0'70DH0?can?"e?manage?a?declining?russiaT'/7(D'H88J'(#&df9
Euro&e is an unavoida4le &artner# *he Euro&ean mar%et consumes 8D[ of )ussiaIs total gas e&orts and RD[ of
its crude oil, "hich ma%e u& only 7/ and '/[ of Euro&eIs total demand, res&ectively# )ussia &resently does not have any
via4le alternative mar%ets remotely e=ual in si@e to Euro&e# De&endence is a t"o?!ay &henomenon# WJD[ of
)ussian &u4lic money5 comes from the sale of oil and gas to Euro&e, and at least (/[ of )ussian
e&ort revenues are lin%ed to the EUIs energy mar%et in general# !ithout any etant alternative mar%ets to
e&loit in the near?term, Mosco" re=uires Euro&ean gas revenues to &reserve its o"n financial
solu4ility# Energy overshado"s other concerns# Paillard 4elieves that "hile the energy trade has, in the &ast, 4een
W&art of a game of 4lac%mail, lies and fearW 4et"een Euro&e and )ussia, its ne" status as a W=uestion of life or death for )ussian
revitali@ationW and its im&ortance to Euro&eIs economic gro"th mean that neither side can afford to use gas su&&lies as leverage in
other international concerns# In PaillardIs estimation, ;russels and Mosco" 4oth regard issues such as human rights or the Chechen
conflict as not 4eing "orth ris%ing the energy trade over# *herefore, )ussian and the Euro&ean Union are inetrica4ly 4ound to one
another 4y their mutual de&endence on the energy trade# )ussia cannot a4sor4 the financial conse=uences of
interru&ting the EU revenue stream, "hile the Euro&ean Union cannot do "ithout )ussian gas su&&lies# Euro&e has
fe" alternative su&&liers, and cannot develo& alternative energy sources in the near term# )ussia, mean"hile, is unli%ely to 4e a4le
to diversify its economy or target ne" mar%ets any 4etter than it has in the &ast#
Russian economic decline causes nuclear war
,ilger E -Sheldon, Author O $uffington Post, 2)ussian Economy Caces Disastrous Cree Call
Contraction5, htt&600"""#glo4aleconomiccrisis#com04log0archives01/R9
%n Russia, historically, economic health and &olitical stability are intertwined to a degree that is rarely
encountered in other maAor industriali@ed economies# It "as the economic stagnation of the former Soviet Union that led to its
&olitical do"nfall# Similarly, Medvedev and Putin, 4oth intimately ac=uainted "ith their nationIs history, are un=uestiona4ly
alarmed at the &ros&ect that )ussiaIs economic crisis "ill endanger the nationIs &olitical sta4ility, achieved at
great cost after years of chaos follo"ing the demise of the Soviet Union# Already, stri%es and &rotests are occurring among ran% and
file "or%ers facing unem&loyment or non?&ayment of their salaries# )ecent &olling demonstrates that the once su&reme &o&ularity
ratings of Putin and Medvedev are eroding ra&idly# ;eyond the &olitical elites are the financial oligarchs, "ho have 4een forced to
deleverage, even unloading their yachts and eecutive Aets in a des&erate attem&t to raise cash# Should the )ussian
economy deteriorate to the &oint "here economic colla&se is not out of the =uestion, the im&act "ill go far 4eyond
the o4vious accelerant such an outcome "ould 4e for the Flo4al Economic Crisis# *here is a geo&olitical dimension
that is even more relevant then the economic contet# Des&ite its economic vulnera4ilities and &erceived decline from su&er&o"er
status, )ussia remains one of only t"o nations on earth "ith a nuclear arsenal of sufficient sco&e and
ca&a4ility to destroy the "orld as "e %no" it# Cor that reason, it is not only President Medvedev and Prime Minister
Putin "ho "ill 4e lying a"a%e at nights over the &ros&ect that a national economic crisis can transform itself into a
virulent and desta4ili@ing social and &olitical u&heaval# It Aust may 4e &ossi4le that U#S# President ;arac% <4amaIs
national security team has already 4riefed him a4out the conse=uences of a maAor economic meltdo"n in )ussia for the &eace of the
"orld# After all, the most recent national intelligence estimates &ut out 4y the U#S# intelligence community have already concluded
that the Flo4al Economic Crisis re&resents the greatest national security threat to the United States, due to its facilitating &olitical
insta4ility in the "orld# During the years ;oris :eltsin ruled )ussia, security forces res&onsi4le for guarding the nationIs nuclear
arsenal "ent "ithout &ay for months at a time, leading to fears that desperate personnel would illicitly sell
nuclear weapons to terrorist organi:ations # If the current economic crisis in )ussia "ere to
deteriorate much further, ho" secure "ould the )ussian nuclear arsenal remainU It may 4e that the
financial im&act of the Flo4al Economic Crisis is its least dangerous conse=uence#
1nc russia soi
7ulf of Mexico natural gas production decreasing
%A, 13 -EIA, R07D0'1, 2Natural gas &roduction declines in the F<M strong on the mainland5,
htt&600"""#cattlenet"or%#com0cattle?ne"s07'77'7(H'#html900EM
Natural gas mar%eted &roduction is &roAected to increase from R8#7 ;cf0d in 7D'7 to (D#D ;cf0d in 7D'1, and to (D#J ;cf0d in 7D'J#
<nshore &roduction increases over the forecast &eriod, "hile federal Fulf of Meico &roduction declines# Natural gas
&i&eline gross im&orts, "hich have fallen over the &ast five years, are &roAected to remain near their 7D'7 level over the forecast#
BNF im&orts are e&ected to remain at minimal levels of around D#J ;cf0d in 4oth 7D'1 and 7D'J# MeicoIs domestic natural gas
consum&tion is rising faster than domestic &roduction, leading to 4oth record &i&eline gas im&orts from the United States and
gro"th in the countryIs im&orts of li=uefied natural gas -BNF9# Natural gas trade 4et"een Meico and the United States has 4een
gro"ingG daily net e&orts from the United States to Meico so far in 7D'1 -.anuary '?May R9 are estimated to average '#R 4illion
cu4ic feet &er day -;cf0d9, u& almost 78 &ercent over the same &eriod in 7D'7# *he N<AA Atlantic $urricane Season <utloo%
&redicts that the Atlantic ;asin li%ely "ill e&erience a4ove?normal tro&ical "eather activity during the current hurricane season#
EIA estimates that the median outcome for shut?in natural gas &roduction in the federally administered
Fulf of Meico as a result of disru&tions during the 7D'1 hurricane season is JR ;cf -see the 7D'1 <utloo% for $urricane?
)elated Production <utages in the Fulf of Meico9# EIAIs simulation results indicate a /H?&ercent &ro4a4ility of offshore natural gas
&roduction e&eriencing outages during the current hurricane season that are e=ual to or larger than the 17 ;cf of &roduction shut in
during the 7D'7 hurricane season#
5lan increases natural gas exports
(now, 13 -Nic% Sno", R0(0'1,2!itnesses descri4e 4enefits from e&anding <CS activity5,
htt&600"""#ogA#com0articles07D'10DR0"itnesses?descri4e?4enefits?from?e&anding?ocs?
activity#html900EM
E&anded oil and gas activity on the US <uter Continental Shelf "ould &roduce su4stantial economic and
energy security 4enefits, three "itnesses told a US $ouse Natural )esources su4committee# ;ut a fourth "itness said
alternative energy and other offshore industries should also 4e allo"ed to gro"# Most of the "itnesses at the Energy and Minerals
Su4committee>s .une R hearing a&&lauded the goals of $) 771', "hich US )e&# Doc $astings -)?!ash#9, the full committee>s
chairman, introduced on .une J# *he measure "ould e&and federal offshore oil and gas leasing 4eyond areas that are &art of the
7D'7?'( <CS &rogram# 2It "ould safely o&en u& ne" areas that "ere &reviously under moratoriaEsuch as
the Mid?Atlantic, Southern Pacific, and Arctic,5 $astings said in his o&ening statement# 2*his "ould create over a million ne"
American Ao4s and generate hundreds of millions of dollars in ne" revenue to the federal treasury#5 .ohn C# Celmy, American
Petroleum Institute chief economist, testified, 2If offshore energy &roduction "ere etended to ne" areas, it could generate a 4ounty
of Ao4 creation and ne" revenues to the government "hile im&roving America>s energy security#5 $e added, 2Earlier this year, a
single lease sale in the Fulf of Meico generated V'#7 4illion in revenue for the federal government# As "ells are drilled and the
leases 4egin to &roduce, the revenue im&act "ill only gro", along "ith the &ros&ects for em&loyment in the region and around the
country#5 Christo&her Fuith, vice?&resident for &olicy at the US Cham4er of Commerce>s Institute for 7'st Century Energy, said in
his "ritten statement that $) 771' is necessary 4ecause more than HR[ of the US <CS is &resently off?limits to oil and gas activity#
Systematic increase 2;y increasing access to the <CS and esta4lishing long?term &roduction targets for the PUSp De&artment of the
Interior to &lan around "hen formulating oil and gas leasing &rograms, the country can 4egin to systematically
increase its energy security and rea& the economic 4enefits that entails,5 Fuith suggested in his "ritten testimony#
/atural gas exports decrease Russian sp$ere of influence
4ugar, 1) former ran%ing mem4er of the Senate Coreign )elations Committee -)ichard F#
Bugar, Indiana )e&u4lican, '70'70'7, 2BUFA)6 U#S# natural gas e&orts could 4rea% )ussian
dominance5, htt&600"""#"ashingtontimes#com0ne"s07D'70dec0'70us?natural?gas?e&orts?
could?4rea%?russian?dominan0&rint0900EM
Dee& "inter is a&&roaching in Eastern and Central Euro&e and the Caucasus, 4ringing "ith it the &ros&ect of icy days and frigid
nights# Cor our friends and allies in the region, it also 4rings a chilly reminder of their chronic over?de&endence for heat and &o"er
on natural gas from )ussia, "hich has demonstrated a &enchant for using energy as a "ea&on against its neigh4ors# *he good ne"s
is, recent trends have turned in favor of our NA*< allies and other friends to 4rea% )ussiaIs energy
dominance# *he United States can ca&itali@e on these trends 4y utili@ing our o"n ne"?found a4undance of
natural gas and &ursuing smart, committed di&lomacy in the region, to hel& many nations diversify their energy
im&orts# Most countries in the eastern Euro&ean Union, nearly all of them NA*< mem4ers, as "ell as E#U# as&irants U%raine and
Moldova, are heavily de&endent on )ussian gas# In the &ast, Mosco" sho"ed itself =uic% to use energy as a clu4 to &unish and coerce
its neigh4ors ?? 4ut the )ussians over&layed their hand# After too many threats and actual cutoffs 4y the Kremlin, the Euro&ean
Commission is no" going after the giant )ussian state gas mono&oly, Fa@&rom, for anti?com&etitive 4ehavior and &rice gouging# At
the same time, Euro&ean countries are turning to the Middle East for ne", chea&er, su&&lies of li=uefied natural gas -BNF9, "hich
had 4een intended for the United States 4efore our o"n shale gas revolution turned us from a nascent im&orter to a &otential
e&orter# *his has hel&ed strengthen the Euro&eansI 4argaining &osition "ith )ussia# *hese trends may
not last, 4ut they have o&ened a "indo" for the United States, "ith our Euro&ean allies, to advance 4road natural gas diversification#
*he U#S# should move =uic%ly to sei@e this o&&ortunity#
T$at causes nuclear war
land 1 Senior Cello" and Director of the Center on Peace _ Bi4erty at *he Inde&endent
Institute, received an M#;#A# in a&&lied economics and a Ph#D# in Pu4lic Policy from Feorge
!ashington University# $e has 4een Director of Defense Policy Studies at the Cato Institute,
and he s&ent '/ years "or%ing for Congress on national security issues, contri4utor to numerous
volumes and the author of J/ in?de&th studies on national security issues -''010DH, Ivan, 2Is a
2)esurgent5 )ussia a *hreat to the United StatesU5 htt&600"""#inde&endent#org0ne"sroom0article#as&U
idZ71R1, ^A9
U#S# analysts say, ho"ever, that increased military s&ending "ould allo" )ussia to have more influence over nations in its near
a4road and Eastern Euro&e# <f course, throughout history, small countries living in the shado" of larger &o"ers have had to ma%e
&olitical, di&lomatic, and economic adAustments to suit the larger &o"er# Increased )ussian influence in this s&here,
ho"ever, should not necessarily threaten the security of the fara"ay United States# It does only 4ecause the
United States has defined its security as re=uiring intrusions into )ussia>s traditional s&here of influence# ;y e&anding NA*< into
Eastern Euro&e and the former Soviet Union, the United States has guaranteed the security of these allied countries against a
nuclear?armed &o"er, in the "orst case, 4y sacrificing its cities in a nuclear "ar# Providing this %ind of guarantee for these non?
strategic countries is not in the U#S# vital interest# Denying )ussia the s&here of influence in near4y areas
traditionally enAoyed 4y great &o"ers -for eam&le, the U#S# uses the Monroe Doctrine to &olice the !estern $emis&here9
"ill only lead to unnecessary U#S#?)ussian tension and &ossi4ly even cataclysmic "ar#
-ubble .A
1/+
/atural gas bubble is being avoided now, w$ic$ restores companies to
profitability' %ncrease in prices is "ey'
Wallace 12 (Christopher, Former private equity fund manager, now full time private investor; 7/17/2012, !atural "as# $ovements %nto
&torage &uggest "lut 'ill &oon (isappear,) &ee*ing +lpha, http#//see*ingalpha,-om/arti-le/72.7/10natural0gas0movements0into0storage0
suggest0glut0will0soon0disappear 0 12'3
4ow mu-h of a glut is there56 7he glut was signifi-ant, a8out 90: a8ove the . year average at the 8eginning of this in;e-tion season,
!atural gas is stored (in underground stru-tures3 and there is a finite amount of gas that -an 8e stored, 7hat amount of ma<imum
storage -apa-ity is estimated to 8e a8out =,200 8illion -u8i- feet, "as in storage is very mu-h a fun-tion of pea* and
trough usage, 7here are times of the year when -onsumption e<-eeds produ-tion and inventories of gas in storage de-line, >withdrawal season>,
7his runs from !ovem8er through $ar-h, From +pril through ?-to8er, produ-tion e<-eeds -onsumption and inventories 8uild through what is
-alled >in;e-tion season>, $any will 8e familiar with the following graph produ-ed and updated 8y the @%+, showing the two seasons#6 +s the
graph depi-ts, this year we 8egan in;e-tion season with inventories 90: a8ove the . year average (2,=A7 8-f this
year versus the . year average of 1,.1= 8-f3, For the last . years, the average inventory 8uild over the in;e-tion season has 8een 2,1=9 8-f, +
normal in;e-tion season would ta*e inventories a8ove storage -apa-ity, a prospe-t that -ould have a
devastating effe-t on gas pri-es, Bust a few months ago, pundits were -alling for this to happen and for natural gas pri-es to approa-h
Cero,6 %n;e-tions are 8elow normal this season, for two fundamental reasons 6 !atural gas inventories are
8uilding at a mu-h slower rate this season, 7he glut that was 8uilt -aused natural gas pri-es to plummet from D1= to a low of
D1,E2 rea-hed this +pril 1E, 7he redu-tion in pri-es was so steep that it has 8rought gas to a level that is 8elow
most fields all0in -ost of produ-tion, 'hen the e-onomi-s are su-h that you are for-ed to sell 8elow -ost, produ-tion naturally
-urtails, 7he natural gas rig -ount has fallen dramati-ally from a pea* of over 1,900 to .22 as at Buly 1A, as drilling new
wells -eased to 8e profita8le,6 7he other fa-tor at wor* here is the de-line rate that all wells go through, !atural
gas wells are most produ-tive after they are initially drilled and then de-line thereafter over their natural
lifetime, 4oriContally drilled wells are unique in that their de-line rate is very steep after the first year, falling 8y a8out 70:, 7he growth in
horiContal wells has -ontri8uted to an in-reased overall de-line rate,6 7he in;e-tion and storage num8ers show the glut 8eing removed6 &o far this
season, in;e-tions are well 8ehind the . year average, 7he glut, whi-h 8egan this in;e-tion season at 90: a8ove the . year
average inventory level is now only 1E: a8ove the . year average inventory level, From wee* 12 to wee* 2/ this year in;e-tions have totaled 799
8-f, -ompared to the . year average for that period of 1,0/7 8-f, a redu-tion of A0:, %f the trend -ontinues at A0: 8elow the . year average,
storage at the end of in;e-tion season (8eginning !ovem8er3 should 8e at A,791 8-f, only /0 8-f a8ove the
. year average, 7he glut will effe-tively 8e removed,6 1ut the story does not end here, 7he rate of in;e-tion relative
to the . year average has 8een de-lining over the -ourse of the in;e-tion season, % tra-* the -urrent year = wee*
rolling average whi-h has 8een de-lining steadily relative to the . year = wee* rolling average, $ost re-ently the -urrent year = wee* average is
=A: 8elow the . year = wee* average, %f the rate of in;e-tions -ontinues at that rate, this fore-asts a season end
inventory of A,927 8-f, whi-h is slightly 8elow the . year average,6 'hat is the impli-ation of this fore-ast56 +
removal of the supply glut should elevate the pri-e of natural gas to its full -y-le -ost of produ-tion plus a
reasona8le profit, 'e are seeing 8asi- e-onomi-s at wor*, $ar*ets are in the long term pursuit of equili8rium, 'hen supply and demand
get out of 8alan-e, the pri-e me-hanism ad;usts to restore equili8rium, @<-essive supply 8rought pri-es down, Frodu-ers will e<hi8it rational
8ehavior in the long run, and they will -urtail produ-tion at pri-es that are 8elow -ost, 'e should e<pe-t no signifi-ant deviation
from this pattern of lower in;e-tions until equili8rium pri-es are a-hieved, meaning total -osts plus reasona8le profit,
(ifferent -ompanies operating in different fields have different -ost stru-tures so it is diffi-ult to ma*e a general statement a8out industry0wide
-osts and therefore where pri-es will return to, 4owever, from what % have read from a variety of sour-es, % thin* that
-osts plus a reasona8le profit fore-asts D. 0 D9 natural gas, %t li*ely wonGt 8e a steady rise to that point, 8ut
on-e the mar*et a--epts that the glut has 8een removed, pri-es should get there, 7he time frame for this to
o--ur should 8e measured in months, not years,
5opping t$e bubble turns t$e aff and causes a supply crunc$
Business Insider 7/4(Hoo*ing +head to the !e<t ?il Fri-e &pi*e and the 7hreat of 'ar,) 7/=/2012 He<is I 12'3
7he diffi-ulty is that an analogous s-enario has unfolded 8efore, in the natural gas industry, ?ut of syn- with other -ommodities, the 8oom and
8ust in natural gas is giving us a glimpse of the future for un-onventional oil, 7he e<tra-tion te-hniques are the same ones that
have generated tremendous hype, while simultaneously setting up a ponCi s-heme in flipping land leases,
-reating the per-eption of supply glut, -rashing the pri-e of natural gas in !orth +meri-a to far 8elow
8rea*0even, amplifying finan-ial ris* for in-reasingly inde8ted produ-ers, and threatening to put those
same produ-ers out of 8usiness,6 7his is the dynami- that is set to lead !orth +meri-a into a natural gas
supply -run-h over the ne<t few years, as we dis-ussed re-ently in &hale "as 2eality 1egins to (awn,7hose involved in
un-onventional oil would do well to ta*e note,
)/+A %mpact Magnifier
An energy bubble collapse spills over to ot$er sectors and collapses t$e economy
Ruppert, 12 # former Bos Angeles Police De&artment narcotics investigator turned investigative Aournalist -2Michael
)u&&ert6 2;e"are the Freen Investment ;u44le5, ecer&t from Confronting Colla&se6 *he Crisis of Energy and Money in a Post Pea%
<il !orld, J0'' htt&600"""#chelseagreen#com0content0michael?ru&&ert?4e"are?the?green?investment?4u44le0?;)!9
It "ould 4e un"ise to instantly forget "hat ha&&ened "ith the dot?com and housing 4u44les#
;oth "ere illusions and "ell?orchestrated "ealth transfers from the middle and lo"er classes to
the "ealthiest &eo&le in the country# *he housing 4u44le "as created and fanned "hite?hot 4y intentionally
deregulating the mortgage industry, fraud and a host of crimes "hich suc%ed &eo&le into 4uying homes they could not afford and
could never ho&e to &ay for# A ton of money "as created and it "ent to the &eo&le "ho ran the schemes6 the largest 4an%s, mortgage
lenders and &olitical cam&aign donors# !hen that 4u44le colla&sed, the ta&ayers "ere as%ed to 4ail out first ;ear Stearns
and then Cannie Mae and Creddie Mac at total costs that "ill to& V' trillion dollars 4efore counting the <cto4er 7DDH
4ailout of VHDD 4illion and all those that follo"ed under many deli4erately confusing names into the first =uarter of 7DD8# As I
"rite, the total 2value5 of various U#S# government 4ailouts has to&&ed V'D trillion# *his doesn>t count the U#S# 4an%s that have failed
and are going to fail 4efore 4an%s are inevita4ly nationali@ed# *hose are the same 4an%s "here green energy com&anies "ill 4e forced
to loo% for financing# Personally, I thin% that the sooner the 4ig 4an%s fail, the sooner &eo&le can get to devising local currencies,
"hich is "hat they>ll need to survive any"ay# It is im&erative to start that &rocess "hile 4ridges are still standing and fresh "ater still
runs# !e need to start the transition to local currencies "hile there is still electricity and "hile fi4er?o&tic ca4les are maintained and
relatively ne"G "hile airlines fly and cell &hones o&erate# None of the a4ove ta%es into account all the cash that home4uyers &ut into
do"n &ayments initially# *hat money "as lost too# *hat>s the same thing as the money that gulli4le investors &oured into the dot?
com 4u44le# *he ones at the 4ottom of the &yramid are al"ays us, and it is al"ays our money that disa&&ears first# *he current
monetary &aradigm offers no other o&tion# *he a4ove does not address the e=uity -energy9 that "as lost in each colla&se# *hese are
real costs# In the mar%et crash of 7DD7 and 7DD1 -"hich I accurately &redicted, saying it "as only a &recursor to today>s events9
hundreds of 4illions of dollars of shareholder e=uity "ere destroyed 4y the fraud of maAor cor&orations# *hose dollars re&resented a
lot more energy than "hat circulates today# *he Cederal )eserve has dou4led its ca&itali@ation in less than a year, having left it alone
for the &revious nine decades# *he e=uity "as destroyed, 4ut the "ealth "as transferred# And e=uity is "here "ealth resides in the
dying economic &aradigm# *here may 4e JD[ less e=uity in the Do" .ones than there "as in late 7DD(, 4ut there is more e=uity that
has 4een hidden and disguised 4y those "ho hold it# ;ut even "ealth transfers have a la" of entro&y# *his is not a case "here all
those investments "ere converted '6' into some other form# *he elites "ho thought they "ere immune are going do"n too, li%e
dinosaurs "ho cannot gras& their im&ending etinction# Even the <racle of <maha, !arren ;uffet, has discovered himself mortal#
As the net"or%s 4lithely tal%ed a4out shareholder e=uity that "as lost at the 4eginning of the colla&se, they almost never
mentioned ho" many 4illions of dollars &ension funds, other institutional investors and
individuals &ut 4ac% in to the mar%ets "hen they 4ought more shares at ne"ly lo"ered &rices#
!hen 4u44les 4urst, those on the 4ottom literally &ay t"ice# *he first time, "hen they 4uy stoc%s that later
tan%, and again "hen they &urchase ne" shares, ho&ing to ma%e u& for the e=uity they lost "hen the &revious 4u44le 4urst# Does
this sound li%e an out?of?control gam4ling addiction to youU !hat ha&&ened "as that the &eo&le at the to& got 2their5 money out, at
the to&# *hey sold their shares 4efore the 4u44le 4urst# *hat>s "hy they call it 2&um& and dum&#5 An American &resident cannot let
this ha&&en "ith a 2Freen Economy5 for three reasons# Cirst, the *reasury is em&ty and the United States no" has
its largest 4udget deficit ever, "ith the national de4t eceeding V'' trillion# It doesn>t have many 4ailouts left,
and these do a4solutely nothing to solve the fundamental &ro4lem# *hey only im&air the system>s a4ility to res&ond to ne"
challenges, li%e feeding you "hen the time comes# Second, the infrastructure costs to assist in some %ind of
sta4le transition and to maintain 4asic services as oil and gas fade a"ay are going to 4e astronomical# *hird, the
Freen Economy has got to &roduce and deliver usea4le solutions =uic%ly# !e cannot afford energy 4ridges to
no"here that ma%e great &rofit for investors 4ut &rovide little or no real?"orld 4enefit# If the Freen
Economy doesn>t do this, then the nation "ill 4e left "ith a non?functioning energy infrastructure#
)/+A Turns +ase
Turns t$e entirety of t$e case 3 t$e burst will ma"e all problems worse
Bictor and Nanose" 11 ? &rofessor at the School of International )elations and Pacific StudiesG AND*** :anose% O M;A
from $arvard -Xictor, David F# :anose%, Kassia# 2*he Crisis in Clean Energy6 Star% )ealities of the )ene"a4les Cra@e5# August,
7D''# Pro=uest O;)!9
After years of staggering gro"th, the clean?energy industry is headed for a crisis# In most of the !estern countries
leading the industry, the &u4lic su4sidies that have &ro&elled it to 7/ &ercent annual gro"th rates in recent years have no"
4ecome &olitically unsustaina4le# *em&orary government stimulus &rograms?"hich in 7D'D su&&lied one?fifth of the
record investment in clean energy "orld"ide?have merely delayed the 4ad ne"s# Bast year, after 7D years of gro"th, the num4er of
ne" "ind tur4ine installations dro&&ed for the first timeG in the United States, the figure fell 4y as much as half# *he mar%et
value of leading clean?energy e=ui&ment manufacturing com&anies has &lummeted and is
&oised to decline further as government su&&ort for the industry erodes# *he coming crisis could ma%e some of
t$e toug$est foreign policy c$allenges facing the United States?from energy insecurity to
the trade deficit to glo4al "arming?even more difficult to resolve# *he revolution in clean energy
"as su&&osed to hel& fi these &ro4lems "hile also creating green Ao4s that "ould &o"er the
economic recovery# Some niches in clean energy "ill still 4e &rofita4le, such as residential roofto& solar installations and
4iofuel made from ;ra@ilian sugar cane, "hich is already com&etitive "ith oil# ;ut overall, the &icture is grim# *his is true not only
for the United States 4ut also for the rest of the "orld, 4ecause the mar%et for clean?energy technologies is glo4al#
<atar .A
1/+
&( gas production crus$es <atar gas wealt$
World 5olitics )evie", U11, .uly 7/, Flo4al Insider6 3atarIs Natural Fas Industry,
htt&600"""#"orld&oliticsrevie"#com0trend?lines08/(70glo4al?insider?=atars?natural?gas?industry
*he 3atari energy cor&oration 3atargas recently signed a deal "ith Argentina to &rovide 'R &ercent of the Batin American countryIs
natural gas needs for 7D years# In an email intervie", Fiacomo Buciani, Princeton glo4al scholar and scientific director of the
international energy &rogram at the Paris School of International Affairs, discussed 3atarIs natural gas industry# !P)6 !hat is the
etent of the glo4al li=uefied natural gas -BNF9 mar%et, and "hat is 3atarIs share, including its maAor BNF trade &artnersU Fiacomo
Buciani6 *he glo4al BNF trade has 4een ra&idly e&anding and can 4e e&ected to continue to do
so# According to ;PIs Statistical )evie" of !orld Energy, in 7D'D, 78(#R1 4illion cu4ic meters -;CMs9 of gas "ere trans&orted
internationally as BNF# <f this amount, 3atar accounted for (/#(/ ;CMs, or roughly one?=uarter of the total# *his
year, 3atarIs rated BNF ca&acity reached (( million tons, "hich is e=uivalent to 'D/ ;CMsG hence, 3atarIs role is li%ely to
increase# In 7D'D, 3atarIs main customers "ere the U#K#, India, .a&an and South Korea# !P)6 !hat are the &rinci&al drivers of
gro"th for 3atariIs BNF sales, and "hat are the maAor o4staclesU Buciani6 3atar em4ar%ed on an am4itious &rogram to develo& the
North Dome gas field ?? the largest in the "orld ?? in the '88Ds# *he field had 4een discovered 4y Shell in '8(' and declared not
commercially via4le# Production only started in '8H8, 4ecause no mar%et could 4e found for the gas 4efore then# 3atar o&ted
early on for e&orting gas in li=uefied form# A4u Dha4i had 4een the first to do soG various &i&eline &roAects "ere
discussed to interconnect the Fulf Coo&eration Council countries or 4ring 3atari gas all the "ay to Euro&e, 4ut none too% off# BNF
investment su4se=uently intensified starting in the 4eginning of this century, due to ra&idly e&anding demand in the Car East and
Euro&e and, nota4ly, the e&ectation that the United States "ould need to su4stantially increase im&orts from distant sources in the
form of BNF# $o"ever, 4y the end of the first decade of this century it 4ecame clear that the 4oom in
nonconventional gas &roduction in the U#S# "ould &revent any su4stantial increase in BNF
im&orts# *he &rice of gas in the United States has fallen to such a lo" level that BNF from 3atar
"ould only 4ring a very meager &rofit, if any# At the same time, the glo4al financial crisis and the doldrums in "hich
4oth the .a&anese and the Euro&ean economies have fallen have caused a decline in gas demand# 3atar thus found itself
"ith a serious overca&acity &ro4lem, "hich it has sought to alleviate through sales to ne", more?distant customers and
through greater reliance on s&ot sales, es&ecially in Euro&e, "here it com&etes "ith &i&eline gas from )ussia and Algeria# *he tide
turned again follo"ing the Cu%ushima nuclear &o"er &lant accident in .a&an# Suddenly, .a&an sought to greatly
increase its BNF im&orts to =uic%ly reduce its reliance on nuclear# In the "a%e of the accident, Fermany and S"it@erland
have decided to gradually &hase out their &o"er &lants and 4uild no ne" ones, "hile Italy has confirmed that it "ill forgo &ursuing
nuclear &o"er# Although the official Ferman government discourse is that nuclear "ill 4e su4stituted for "ith rene"a4le sources, the
latter are intermittent in nature, and increased reliance on &o"er generation from gas is an almost
unavoida4le conse=uence#
<atar /atural gas wealt$ is "ey to middle east stability
Reuters )21), H0'R0# MIDEAS* M<NE:?Economics, &olitics under&in 3atar aid to North Africa,
htt&600"""#reuters#com0article07D'70DH0'R0egy&t?=atar?idUSBREH.D(I*7D'7DH'R
D<$A, Aug 'R -)euters9 ? !ith a &lan to de&osit V7 4illion in Egy&tIs central 4an%, 3atar is 4ecoming one
of the to& financial 4ac%ers of the struggling country as it signals an intention to &lay a 4ig role
in re4uilding North African economies after last yearIs u&risings# Barger foreign donors have 4een
cautious a4out lending money to economies hit 4y the Ara4 S&ring, 4ut 3atar ? "ith a &o&ulation of Aust
'#( million ? is using its natural gas "ealth to esta4lish itself as an economic force in the region# *he
aid a&&ears to have 4oth &olitical and economic motives, di&lomats and analysts say# ;y su&&orting economies in North
Africa, 3atar hel&s to limit further social unrest that mig$t spread to t$e 7ulf # Mean"hile, some
of its aid involves investment that could 4e very &rofita4le if North African economies eventually
resume gro"ing ra&idly# W3atar is attem&ting to achieve maAor &olitical and economic goals "ith
its dynamic foreign &olicy in resha&ing North Africa in the "a%e of the Ara4 S&ring,W said *heodore
Karasi%, director of research at the Institute for Near East and Fulf Military Analysis in Du4ai# *he V7 4illion de&osit from 3atar
"ould 4e a significant 4oost to Egy&tIs foreign reserves, "hich have more than halved since the start of last year
to V'J#J 4illion in .uly# *he Egy&tian finance minister said on Monday that the first V/DD million &ayment from 3atar "as e&ected
"ithin a "ee%# *he announcement follo"ed ne"s in .une that state?o"ned 3atar Petroleum -3P9 "as involved in a V1#( 4illion
financing &ac%age to 4uild an oil refinery on the outs%irts of Cairo, one of the 4iggest industrial &roAects announced since Egy&tIs
revolution# 3P International committed over V1R7 million to 4uy a 7(#8 &ercent sta%e in the &roAect# And last <cto4er 3atari Diar,
the &ro&erty arm of 3atarIs sovereign "ealth fund, signed a V/JJ million contract to develo& t"o real estate &roAects in Egy&t, in
Cairo and Sharm el?Shei%h# Since Egy&tIs revolution, only Saudi Ara4ia a&&ears to have made a larger financial commitment to the
country# It transferred V/DD million to the Egy&tian central 4an% in May last year, and in .une this year it &rovided a further V'#/
4illion to su&&ort Egy&tian government finances, according to officials in CairoG it has also &romised VJ1D million in &roAect aid and
a V(/D million line of credit for oil im&orts# *he International Monetary Cund has 4een discussing a V1#7 4illion loan to Egy&t, 4ut
agreement has so far 4een delayed 4y changes in the Egy&tian government and the IMCIs concern a4out the "isdom of the countryIs
economic &olicies# 3atar has also thro"n an economic lifeline to *unisia, "hich in A&ril raised V/DD million at a
7#/ &ercent interest rate via a &rivate &lacement of de4t to 3atar# In May the 3atari government said it "as reviving &lans to 4uild a
4uild a V7 4illion oil refinery in *unisia after years of delays, &otentially e&anding the North African countryIs refining ca&acity
more than fourfold# In Morocco, 3atarIs &lans include a /D?/D investment Aoint venture "orth V7 4illion, agreed late last year, to
hel& the country fund maAor develo&ment &roAects# 3atarIs sovereign "ealth fund, Ku"aitIs Al AAial Investments and A4u Dha4iIs
sovereign "ealth fund Aa4ar Investments have also agreed "ith MoroccoIs Cund for the Develo&ment of *ourism to inAect 7D#H
4illion dirhams -V7#/ 4illion9 into a ne"ly created vehicle called !essal Ca&ital to focus on develo&ing ne" tourism resorts in
Morocco# M<*IXES Pu4licly, 3atar has 4een noncomittal a4out the motives for its su&&ort of North
African economies, 4eyond saying it "ants to s&read &ros&erity and foster good ties "ith all
countries# WDonIt you thin% this is a good &olicy for a small countryUW 3atarIs Emir Shei%h $amad 4in Khalifa al?*hani said in an
intervie" "ith U#S# television &rogramme RD Minutes in .anuary, "hen as%ed a4out its efforts to 4uild 4ridges in the region# Its
motives a&&ear &artly ideological, ho"ever# In contrast to Saudi Ara4ia, "hich has 4een sus&icious of the Muslim ;rotherhoodIs
&otential to stir social unrest in the Fulf, 3atarIs close ties to the ;rotherhood etend over decadesG it has &rovided eile to
&rominent ;rotherhood mem4ers, the most &rominent of them Egy&tian Shei%h :ousef al?3arada"i, vie"ed as the movementIs
s&iritual leader# *he victory of the ;rotherhoodIs Mohamed Mursi in Egy&tIs .une &residential elections finally gave 3atar the
chance for a close alliance "ith Cairo# W*heir 4rand of Islam is acce&ta4le to the 3ataris, and they are &o"erful6 a "inning
com4ination,W said a Doha?4ased source close to the government, "ho declined to 4e named 4ecause of &olitical sensitivities# *he
de&osit in Egy&tIs central 4an% hel&s the 3ataris Wmaintain their alliance structure "hile at the same time increasing their &o"erW,
the source said# A second source in Doha "ith ties to the government said6 W*he 3ataris have an interest in securing domestic
sta4ility in Egy&t# *hey donIt "ant to see a situation "here their o"n guys are struggling#W ;ut the motives are also economic# In
recent years 3atar, li%e other Fulf Ara4 countries, has em4ar%ed on a &olicy of investing around the "orld to &re&are for the
eventual de&letion of its energy resources# In North Africa, its investments since last year have focused on energy and 4an%ing, t"o
sectors "hich can 4e e&ected to gro" 4ecause of young &o&ulations and relatively high &o&ulation gro"th rates, as "ell as on
tourism# Among 3atarIs regional investments since the Ara4 S&ring, 3atari Diar said last <cto4er that it "ould 4uild an VHD million
tourism and leisure com&le over JD hectares in *unisiaIs southern city of *o@eur, a to& tourist destination# 3atarIs state?4ac%ed
3Invest sealed a deal to hive off the investment 4an%ing 4usiness of Egy&tIs ECF $ermes through a Aoint venture in "hich 3Invest
"ould o"n RD &ercent ? a deal "hich "ould &rovide money for ECF, the Middle EastIs 4iggest home?gro"n investment 4an%, to
e&and across the region# And 3atar National ;an%, the Fulf countryIs 4iggest lender, "hich is /D &ercent government?o"ned,
agreed to 4uy a maAority sta%e in MoroccoIs Union Marocaine des ;an=ues# WFiven the amount 3atar has to invest, it
is loo%ing for o&&ortunities in the region that offer commercial return and0or &olitical leverage,W
said a Doha?4ased economist# W*he three North African countries that have undergone &olitical transition naturally offer a rare
o&&ortunity to increase 3atari engagement, 4oth 4ecause these countries have urgent needs for investment and assistance, and
4ecause the ne" governments are more naturally sym&athetic to 3atar than the outgoing regimes#W
xtinction
Russell, E -.ames A# )ussell, Senior Becturer, National Security Affairs, Naval Postgraduate
School, N8 -S&ring9
2Strategic Sta4ility )econsidered6 Pros&ects for Escalation and Nuclear !ar in the Middle East5
IC)I, Proliferation Pa&ers00,
`7R, TThtt&600"""#ifri#org0do"nloads0PP7RT)ussellT7DD8#&dfTT9
Strategic sta4ility in the region is thus undermined 4y various factors6 -'9 asymmetric interests in the 4argaining
frame"or% that can introduce un&redicta4le 4ehavior from actorsG -79 the &resence of non?state actors that
introduce un&redicta4ility into relationshi&s 4et"een the antagonistsG -19 incom&ati4le
assum&tions a4out the structure of the deterrent relationshi& that ma%es the 4argaining
frame"or% strategically unsta4leG -J9 &erce&tions 4y Israel and the United States that its "indo" of o&&ortunity for
military action is closing, "hich could &rom&t a &reventive attac%G -/9 the &ros&ect that Iran>s res&onse to &re?em&tive attac%s could
involve unconventional "ea&ons, "hich could &rom&t escalation 4y Israel and0or the United StatesG -R9 the lac% of a
communications frame"or% to 4uild trust and coo&eration among frame"or% &artici&ants# *hese
systemic "ea%nesses in the coercive 4argaining frame"or% all suggest that escalation 4y any the &arties could
ha&&en either on &ur&ose or as a result of miscalculation or t$e pressures of "artime
circumstance# Fiven these factors, it is distur4ingly easy to imagine scenarios under "hich a conflict could =uic%ly
escalate in "hich the regional antagonists "ould consider the use of chemical, 4iological, or nuclear
"ea&ons# It "ould 4e a mista%e to 4elieve the nuclear ta4oo can someho" magically %ee& nuclear "ea&ons from 4eing used in the
contet of an unsta4le strategic frame"or%# Systemic asymmetries 4et"een actors in fact suggest a certain increase in the &ro4a4ility
of "ar O a "ar in "hich escalation could ha&&en =uic%ly and from a variety of &artici&ants# <nce such a "ar starts, events "ould
li%ely develo& a momentum all their o"n and decision?ma%ing "ould conse=uently 4e sha&ed in un&redicta4le "ays# *he
international community must ta%e this &ossi4ility seriously, and muster every tool at its dis&osal to &revent such an outcome, "hich
"ould 4e an un&recedented disaster for the &eo&les of the region, "ith su4stantial ris% for the entire "orld#
Warming .A
1/+
/atural gas xports cause warming
Romm 1) -.oe, Senior Cello" at American Progress, editor of Climate Progress, assistant secretary of energy for energy
efficiency and rene"a4le energy in '88(, Ph#D# in &hysics from MI*, 2E&orting Bi=uefied Natural Fas -BNF9 Is Still ;ad Cor *he
Climate E And A Xery Poor Bong?*erm Investment,5 H?'R?'7, htt&600thin%&rogress#org0climate07D'70DH0'R0R88RD'0e&orting?
li=uefied?natural?gas?lng?4ad?for?climate?&oor?long?term?investment09
And as "e>ve seen, BNF shi&&ed from the U#S# is much "orse from a F$F &ers&ective than regular
gas, so 4y the time a lot of ne" BNF terminals are u& and running in this country, it seems li%ely
that BNF?fired &lants overseas "ill 4e have a higher F$F intensity than the average &lant in the
electric generation system needed to 4e any"here near a non?catastro&hic emissions &ath# !e
do not "ant to 4uild a glo4al energy system around natural gas -see IEA>s 2Folden Age of Fas Scenario5
Beads to More *han RqC !arming and <ut?of?Control Climate Change9 # At the time, the UK FuardianNs
story &ut it "ell6 At such a level, glo4al "arming could run out of control, deserts "ould ta%e over in
southern Africa, Australia and the "estern US, and sea level rises could engulf small island
states# *he etra emissions from BNF all 4ut eliminate "hatever small, short?term 4enefit there
might 4e of 4uilding 4illion?dollar e&ort terminals and other BNF infrastructure, "hich in any case "ill last many
decades, long after a sustaina4le electric grid "ill not 4enefit one Aot from re&lacing coal "ith
gas# Asserting any net 4enefit re=uires assuming the ne" gas re&laces only coal E and isn>t used for, say, natural gas vehicles,
"hich, as noted, are "orse for the climate or that it doesn>t re&lace ne" rene"a4les# If even a modest fraction of the
im&orted BNF dis&laces rene"a4les, it renders the entire e&enditure for BNF
counter&roductive from day one# )emem4er, a maAor 7D'7 study on 2technology "arming &otentials5 -*!Ps9 found
that a 4ig s"itch from coal to gas "ould only reduce *!P 4y a4out 7/[ over the first three decades -see 2Natural Fas Is A ;ridge *o
No"here A4sent A Car4on Price AND Strong Standards *o )educe Methane Bea%age29# And that is 4ased on 2EPA>s latest estimate
of the amount of C$J released 4ecause of lea%s and venting in the natural gas net"or% 4et"een &roduction "ells and the local
distri4ution net"or%5 of 7#J[# Many e&erts 4elieve the lea%age rate is higher than 7#J[, &articularly for
shale gas# Also, recent air sam&ling 4y N<AA over Colorado found J[ methane lea%age, more than dou4le industry claims# A
different 7D'7 study 4y climatologist Ken Caldeira and tech guru Nathan Myhrvold finds 4asically no 4enefit in the s"itch
"hatsoever E see :ou Can>t Slo" ProAected !arming !ith Fas, :ou Need N)a&id and Massive De&loyment> of ^ero?Car4on Po"er#
*hat study ta%es into account the near?term im&act of the construction of ne" infrastructure# ;<**<M BINE6 Investing
4illions of dollars in ne" shale gas infrastructure for domestic use is, at 4est, of limited value for
a short &eriod of time if "e &ut in &lace 4oth a C<7 &rice and regulations to minimi@e methane lea%age# E&orting gas
vitiates even that limited value and so investing 4illions in BNF infrastructure is, at 4est, a "aste
of resources 4etter utili@ed for de&loying truly lo"?car4on energy # At "orst, it hel&s accelerates the
"orld &ast the 7qC -1#RqC9 "arming threshold into *erra incognita E a &lanet of am&lifying
feed4ac%s and multi&le simultaneous catastro&hic im&acts #
xtinction
(tein, 11 R07R07D'' -Science editor for the maga@ine the
Canadian9 htt&600"""#agoracosmo&olitan#com0home0Cront&age07DD(0D707R0D'1H'#html9
"The scientific debate about human induced global warming is over but policy makers - let
alone the happily shopping general public - still seem to not understand the scope of the impending
tragedy. Global warming isn't just warmer temperatures, heat waves, melting ice and threatened polar
bears. Scientific understanding increasingly points to runaway global warming leading
to human extinction", reported Bill Henderson in CrossCurrents. If strict global environmental
security measures are not immediately put in place to keep further emissions of
greenhouse gases out of the atmosphere we are looking at the death of billions the
end of civili!ation as we know it and in all probability the end of humankind's several
million year old existence, along with the extinction of most flora and fauna beloved to man in
the world we share.
)/+A (olar nergy 4in"
/at gas exports prevents solar development
.umaine 1) ?? senior editor?at?large c CNNMoney -;rian, J0'(0'7, W!ill gas cro"d out "ind
and solarUW htt&600tech#fortune#cnn#com07D'70DJ0'(0yergin?gas?solar?"ind0UiidZ$PTBN9
Crac%ing technology has given the U#S# a 'DD?year su&&ly of chea& natural gas# !hatIs its im&act on coal, nuclear, "ind, and solar
&o"erU Ine&ensive natural gas is transforming the com&etitive economics of electric &o"er
generation in the U#S# Coal &lants today generate more than JD[ of our electricity# :et coal &lant construction is
grinding to a halt6 first, 4ecause of environmental reasons and second, 4ecause the economics of natural gas
are so com&elling# It is 4eing cham&ioned 4y many environmentalists as a good su4stitute for coal 4ecause it is cleaner and
emits a4out /D[ less car4on dioide# Nuclear &o"er no" generates 7D[ of our electricity, 4ut the &lants are getting old and "ill
need to 4e re&laced# !hat "ill re&lace themU <nly a fe" nuclear &lants are 4eing 4uilt in the U#S# right no"# *he economics of
4uilding nuclear are challenging ?? itIs much more e&ensive than natural gas# IsnIt the "orry no" that chea& natural gas might also
cro"d out "ind and solarU :es# *he de4ate is over "hether natural gas is a 4ridge fuel to 4uy time "hile rene"a4les develo& or
"hether it "ill itself 4e a &ermanent, maAor source of electricity# !hat do you thin%U <ver the &ast year the de4ate has moved
4eyond the idea of gas as a 4ridge fuel to "hat gas means to U#S# manufacturing and Ao4 creation and ho" it "ill ma%e the U#S# more
glo4ally com&etitive as an energy e&orter# *he PresidentIs State of the Union s&eech "as remar%a4le in the "ay it "ra&&ed the
shale gas 4oom into his economic &olicies and Ao4 creation# I 4elieve natural gas in the years ahead is going to 4e
the default fuel for ne" electrical generation # Po"er demand is going to go u& '/[ to 7D[ in the
U#S# over this decade 4ecause of the increasing electrification of our society ?? everything from iPads to electric Nissan Beafs#
Utilities "ill need a &redicta4le source of fuel in volume to meet that demand, and natural gas
4est fits that descri&tion# And that "onIt ma%e the environmental community ha&&yU !ell, natural gas may 4e a relatively
clean hydrocar4on, 4ut itIs still a hydrocar4on# So "ind and solar "ill have a hard time com&etingU )emem4er that "ind and solar
account for only 1[ of our electric &o"er, "hereas natural gas is 71[, and its share "ill go u& fast# Most of that 1[ is "ind# Natural
gas has a ne" role as the &artner of rene"a4les, &roviding &o"er "hen the "ind is not 4lo"ing and the sun is not shining# !ill solar
scaleU Solar is still under '[ of U#S# electric generation, and even though its costs have come do"n
dramatically, they must come do"n a lot more# Solar is generally much more e&ensive than coal and
natural gas# :ou have to remem4er that energy is a huge, ca&ital?intensive 4usiness, and it ta%es a very
long time for ne" technologies to scale# *he eu&horia that comes out of Silicon Xalley "hen you see ho" =uic%ly a
*"itter or a :ou*u4e can emerge doesnIt a&&ly to the energy industry#
4in"s
+ap H
xpanding natural gas demand and infrastructure is t$e operative lync$pin of a
cycle of capitalist exploitation' t$ere is an et$ical obligation to interrupt t$is drive
towards destruction of t$e globe'
c$arman )"12 PKaren, *rashing the Planet for Natural Fas6 Shale Fas Develo&ment *hreatens
Cresh"ater Sources, Bi%ely Escalates Climate Desta4ili@ation, Ca&italism Nature and
Socialism, 7'6J, (7?H7?;)!Q
Des&ite increasing evidence of the danger and irreversi4le ecological damagej in areas "here hori@ontal
hydrofrac%ing for natural gas is ta%ing &lace,j governments around the "orld a&&ear to 4e em4racing this ne" method ofj resource
e&loitation# *he United States encourages gas drilling "ith morej than V'1#/ 4illion of su4sidies, most
of "hich "ere authori@ed in the 7DD/ Energy Policyj Act#JR As a result, for five years &rior to 7DD8, a ty&ical U#S# gas com&any &aid
D#1 &ercent ta on itsj &rofit instead of the standard cor&orate ta rate of 1/ &ercent#J( *hough most of the su4sidies a&&ly to thej
e&loration rather than the &roduction &hase of natural gas etraction, to"nshi&s and residentsj don>t collect taes
or royalties until gas &roduction reaches a certain level# Fasj com&anies, ho"ever, receive
su4sidies "hether or not their "ells &roduce,j thus leasing land, e&loration, and drilling are
essentially ris%?free activities,j &ossi4ly even if com&anies a4andon drilled "ells "ithout
cleaning them u&#JHj A 7DDJ la" that deems oil and gas a NNmanufactured good>> &ermits com&aniesj to claim 4illions of
dollars in ta deductions, shifting much of the cost of gas &roduction toj American ta&ayers#J8 Another su4sidy allo"s com&ani
es to "rite off (D?'DDj &ercent of their outlay for e=ui&ment, su&&lies, and other costs of drilling#/Dj <ther su4sidies
guarantee that the gas industry &ays almost nothing forj the cost of gas distri4ution and gas &i&elines#/' Fas com&anies and theirj
investors are also allo"ed to "rite off losses, ena4ling them to shelter otherj income#/7 Currently, efforts are under"ay in the U#S#
Congress for su4stantialj ne" su4sidies to s"itch fuels in the trans&ortation sector 4y encouraging thej "ides&read ado&tion of cars
and truc%s that run on natural gas#/1j *he various su4sidies and incentives "ere ado&ted ostensi4ly to 4oost domestic natural gas
&roduction toj ma%e the U#S# energy inde&endent# $o"ever, as Investing Daily &oints out, NNit>s im&ortant to remem4erj that energy
mar%ets are glo4al#>>/J A raft of recent international deals indicates that much of the gas drilledj in the U#S# is intended for the
international energy mar%et# In Novem4er 7DDH, U#S#?4ased Chesa&ea%ej Energy, a maAor investor in the Marcellus Shale, sold the
second largest su&&lier of natural gas in Euro&e,j the Nor"egian com&any Statoil$ydro, a 17#/ &ercent sta%e in its Marcellus leases,
a deal that could add thej e=uivalent of 7#/ to 1 4illion 4arrels of oil to Statoil$ydro>s reserves#// Investing Daily re&orts that also
inj 7DDH, Chesa&ea%e Aoined ;P in a V'#8 4illion Aoint venture in the Cayetteville Shale in Ar%ansas# In earlyj 7D'D, Chesa&ea%e
formed a V7#7/ 4illion Aoint venture "ith the Crench energy giant *otal that gives *otalj a 7/ &ercent sta%e in Chesa&ea%e>s assets in
the ;arnett Shale in *eas# India>s largest com&any, )eliance,j 4ought a J/ &ercent sta%e in Pioneer Natural )esources> gas leases in
the Eagle Cord Shale in southernj *eas after &urchasing a JD &ercent sta%e in Atlas Energy>s Marcellus Shale holdings# <il giants
)oyalj Dutch Shell, EonMo4il, and ConocoPhilli&s are also ma%ing significant investments in unconventionalj natural gas in the
U#S# and else"here, as are Chinese com&anies#/RPro&onents argue unconventional natural gas is clean and
needed as a NN4ridgej fuel>> that "ill hel& reduce greenhouse gas emissions to hel& cur4 glo4alj
climate desta4ili@ation until "e can transition a"ay from coal# ;ut this claimj neglects to
account for 4oth the energy re=uired and the resulting emissionsj from etracting, &rocessing,
and distri4uting the gas*i#e#, the use of fossilj fuels to 4uild &i&elines, truc% the enormous amounts of "ater needed forj
hydrofrac%ing, drill "ells, manufacture the chemicals for the frac%ing fluids,j run the com&ressors, and treat and trans&ort the
"aste"ater#/( Nor doesj it consider the loss of car4on sin%s from forests cleared for drilling#/H Noj scientific &eer?revie"ed
analyses of greenhouse gas emissions measuring thej entire fuel cycle for shale and other unconventional gas sources have yet 4eenj
com&leted and &u4lished# Cornell ecologist )o4ert !# $o"arth is analy@ing total greenhousej gas emissions from Marcellus Shale
gas develo&ment# $is &reliminary data suggest that 4ecausej of the difficulty of o4taining the more diffuse shale gas, these
additionalj emissions are li%ely to 4e at least three times the greenhouse gas emissionsj for
etracting, &rocessing, and trans&orting diesel fuel and gasoline#/8j Much more of a concern, ho"ever, is the
lea%age of methane into thej atmos&here during all stages of drilling, &rocessing, trans&orting and 4urningj the gas# Methane,
"hich is (7 times more &o"erful a greenhouse gas &erj molecule than C<7,RD is the maAor com&onent of natural gas# $o"arth
notesj that the numerous incidents of e&losions and contaminated "ells in shalej gas drilling areas in Pennsylvania, !yoming, and
<hio in recent years revealj &ath"ays for methane to esca&e into the atmos&here6 NN*he concentrationsj of methane necessary for an
e&losion are at least 'D,DDD?fold higher thanj those normally in the atmos&here, and this lea%age from contaminatedj
ground"ater is &ro4a4ly =uite significant in terms of the greenhouse?gasj foot&rint of shale gas#>>R' Although $o"arth>s study is not
yet com&lete, his &reliminary resultsj indicate that the greenhouse gas foot&rint of Marcellus Shale gas is
NN&ro4a4ly atj least t"ice as great as the emissions from Aust 4urning the gas# *hat is, shalej gas
is not a clean fuel and a&&ears to 4e a &oor choice as a transitional fuelj over the coming
decades if the U#S# is serious a4out addressing glo4al climatej disru&tion#>>R7 *"o California scientists,
Mar% .aco4son from Stanford University and Mar% Delucchij from the University of California at Davis, have laid out a &lan to
eliminate fossil fuel use in every countryj on the &lanet and re&lace it "ith clean, rene"a4le energy*currently eisting "ind, solar,
geothermal, tidalj and hydroelectric &o"er technologies*in Aust ten years#R1 *heir &lan calls for NNmillions of "ind tur4ines,j "ater
machines, and solar installations#>>j !hile they ac%no"ledge the num4ers are large, they &oint out that massive societal
transformations havej ta%en &lace 4efore, for eam&le "hen the U#S# retooled its automo4ile manufacturers during
!orld !arj II to 4uild 1DD,DDD aircraft, and other countries &roduced another JHR,DDD# *hey also ac%no"ledge somej technical
hurdles, 4ut none that seem insurmounta4le# *he 4iggest road4loc% a&&ears to 4ej the Auggernaut of
ca&italist ideology and &o"er that in the face of escalatingj ecological catastro&he refuses to give
u& its short?term &rofit?driven deathj gri& on the &lanet#
0il
5lan Ramps up domestic oil production 3 s$ifting imports and causing a saudi
flood
lass et al' 12 - *he $istory of U#S# )elations "ith <PEC6 Bessons to Policyma%ers .areer Elass and Amy Myers .affe $E $
IS*<): <C U#S# ) EBA*I<NS !I*$ <PEC6 B ESS<NS *< P <BIC:MAKE)S ;y .A)EE) EBASS SEP*EM;E) 7D'D
htt&600"""#4a%erinstitute#org0&u4lications0Amy[7D.areer[7DU#S#[7D)elations[7D"ith[7Dcover[7Dsecured#&df O;)!9
*he <4ama rhetoric and other similar language among U#S# &oliticians &rom&ted Saudi Prince *ur%i Al?
Caisal, the former long?serving director of Saudi Intelligence and former am4assador to the United States, to "rite a sur&risingly
4l unt editorial in the Se&tem4er0<cto4er 7DD8 Coreign Policy# *he editorial too% the <4ama administra tion and the U#S# goal of
achieving energy de&endence to tas%, noting that, 2*he allure of demagoguery is strong, 4ut U#S# &oliticians must muster the courage
to scra& the fa4le of energy inde&endence once and for all#5 Calling the conce&t of energy inde&endence
2unrealistic, misguided, and ultimately harmful to energy&roducing and Oconsuming countries, ali%e,5
Prince *ur%i argued that there is no technology in the foreseea4le future that can com&letely
re&lace oil# $e noted that U#S# energy needs "ill have to 4e met "ith a mi of 4oth rene"a4le and fossil fuels# Cor that reason,
the &rince suggests that the <4ama administration should focus on 2en ergy interde&endence5 rather than energy inde&endence, as
2the fates of the United States and Saudi Ara4ia are connected and "ill remain so for decades to come#5 R Prince *ur%i suggested
that the term 2energy inde&endence5 commonly used 4y the United States is often used 2as little
more than a code for arguing that the United States has a dangerous reliance on my country of
Saudi Ara4ia, "hich gets 4lamed for everything from glo4al terrorism to high gasoline &rices#5 $ighlighting Saudi Ara4ia>s role
for the last thr ee decades of "or%ing to ensure the sta4ility of the "orld>s energy su&&ly, Prince *ur%i stressed in his Coreign Policy
editorial that the %ingdom has invested more than V'DD 4illion to e&and its sustained &roduction
ca&acity to '7#/ million 40dEena4ling Saudi Ara4ia to accommodate the loss of the second? and
third?largest <PEC &roducers overnight, if need 4e# H Plans for a first tranche of V'J 4illion in Saudi
oil investments 4y 7DD8 "ere aimed to achieve this rate of sustaina4le &roduc tion 4y no"# $o"ever,
this goal could only 4e accom&lished if national oil com&any Saudi Aramco "ere successful in stemming the natural decline in its
aging fields to t"o &ercent &er annum# *his has 4een hard to accom&lish and the %ingdom>s sustaina4le &roduction ca&acity is not
4elieved to 4e much a4ove '' million 40d# 8 <ne maAor &roAect that "as su&&osed to re&lace declining &roduction from mature fields
"as ne" &roduction from the offshore Manifa field# *he develo&ment of the Manifa field, "hich is su&&osed to reach 8DD,DDD 40d in
the coming years, is said to 4e at leas t t"o years delayed, ma%ing it harder for the %ingdom to reach its sustaina4le oil &roduction
goals# Ma nifa is unli%ely to reach more than J/D,DDD 40d 4y 7D'1, and achieve its target level only in 7D'/# Cuture investments are
e&ected to 4e more e&ensive, as the %ingdom has com&leted e&ansion of &roAects involving less com&le reservoirs an d no" must
tac%le more challenging geologic areas "ith less &orous roc%# !ith tric%ier reservoirs in eisting fields no" needing to 4e ta&&ed,
Saudi Aramco e&ects its costs to go u&# As&irations to e&and e&l oration to ne" areas such as the dee&"ater )ed Sea "ill 4e tech
nically difficult for Saudi Aramco# ;y his second year in office, President <4ama tem&ered his focus on energy inde&endence, noting
that the move from fossil fuels to clean energy "ill re=uire time and 4e costly# Still, the &resident noted6 2###"e can>t afford not to
change ho" "e &roduce and use energyE4ecause the long?term costs to our economy, our national se curity, and our environment
are far greater#5 U#S# )elations "ith <PEC '1 Indeed, the costs of trying to eliminate oil im &orts in the short run "ould 4e
incredi4ly e&ensive# U#S# oil im&orts of roughly '' million 40d are the e=ui valent of 'H#( tera"att hours of energy# *o re&lace
all of this im&orted oil "ith no n?fossil energy sources "ould 4e the e=uivalent of adding almost
eight times the current U#S# total ca&acity for nuclear &o"er generation -assuming 7J?hour, 'DD &ercent
o&erations9# *he United States currently o&erates 'D1 nuclear &lants# *here are also more than 7/D million oil fuel?4ased motor
vehicles in the United States# <n average, Americans retire (/ &ercent of moto r vehicles over a sevenyear &eriod# *hus, the
infrastructure demands alone in shifting the e=uiva lent of 'H#( tera"att hours of oil 4ased
energy use are immense, 4oth in terms of scale and timeline for retiring eis ting motor vehicle
and energy &roduction facility stoc%s# U#S# President ;arac% <4ama and <PEC <PEC mem4ers may have a&&lauded
the election of ;arac% <4ama to the U#S# &residency much li%e the maAority of th e international community did in Novem4er 7DDH,
4ut the grou& made it evident early on that <PEC doesn>t see eye?to?e ye "ith President <4ama on the energy &latform that he
es&oused during the American &resid ential cam&aignEincluding a commitment to once and for all eliminate American de&endence
on foreign oil# Fiven the scale u& and timing issues, as reflected in Prince *ur%i>s o& ed, leaders from <PEC oil
&roducing countries remain s%e& tical of the <4ama administra tion>s &ush for rene"a4le energy
develo&ment, electric cars, and the administration>s initially am4iti ous commitment to slash U#S#
greenhouse gas -F$F9 emissions and su&&ort a gl o4al climate treaty# 05+6s best defense
against alternative energy would be to drop t$e price of oil to levels t$at would
render alternative energy as commercially unprofitable# ;ut the &roducer grou& is not
currently actively concerned a4out the threat of alternative energy or electrification of the
trans&ortation sector 4ecause it doesn>t 4elieve that such technologies can 4e scaled u&
commercially to a significant level "ithin the net t"enty or thirty years# <PEC leaders are more concerned
that a U#S# or glo4al climate regime not ta or &enali@es &etroleum in a su4stantial fashion that significantly disadvantages oil?4ased
fuel# A U#S# 4order car4on ta that h its all U#S# im&orts, including oil im&orts from Saudi Ara4ia, might 4e vie"ed as a more serious
trade &ro4lem than U#S# &olicies to &romote alternative energy# ;ut so far, <PEC has not had to "orry too mu ch a4out the <4ama
admi nistration moving ahead forcefully "ith overly am4itious energy and clim ate &olicy &lans# Instead, the ne" administration has
4een hamstrung "ith a struggling U#S# econo my# *he administration>s long struggle to &ass maAor health care reform 4et"een 7DD8
and the s&ring of 7D'D has dam&ened its chances of &assing su4stantial climate legislation either late r this year or into ne t year,
and President <4ama has also had to co&e "ith the fallout fr om the "ea% accord &roduced from the Decem4er 7DD8 U#N# climate
tal%s held in Co&enhagen# *hus, <PEC>s charge has 4een mainly focused on reacting to &ros&ects that tightened fuel economy
standards "ill cur4 gro"th in oil use in the U#S# mar%et over time# Bess than t"o months after the U#S# &residen tial inauguration,
<PEC signaled good"ill to"ard President <4ama "hen the grou& convened in Xienna in March 7DD8 to assess mar%et conditions
and steered clear of a&&roving ne" su&&ly reduc tions# <PEC seemed reluctant to send the <4ama administration a negative signal
at such an early stage# And, the grou& gave strong consideration to the im&act that a cut in out &ut "ould have on a str uggling glo4al
economy# Key <PEC leaders "ere also cautious that the organi @ation>s deli4erations not a&&ear to undermine a critical F?7D heads
of stat e summit the follo"ing month#
5olitics
ven if t$ey win t$e plan is popular, implementation force a fig$t
Rampton =K)EK13 staff re&orter at )euters -)o4erta )am&ton, 2 UPDA*E '?U#S#?Meico deal on e&anded Fulf oil
drilling still in lim4o, Mon A&r 78, 7D'1 86'8&m htt&600u%#reuters#com0article07D'10DJ0780usa?meico?oil?
idUKB7NDDF'M)7D'1DJ78900K:
* <4ama heads to Meico on *hursdayG energy on the agenda * U#S# has not im&lemented drilling agreement
signed a year ago * U#S# Congress no" 4eginning to loo% at language * $ouse "ants eem&tion from Dodd?Cran% disclosure
rule9 ? More than a year after the United States and Meico signed a much?lauded deal that "ould
remove o4stacles to e&anding dee&"ater drilling for oil in the Fulf of Meico, the agreement has still not
4een finali@ed 4y the United States# *he delay, for "hich &eo&le close to the administration 4lame Congress
"hile )e&u4licans in Congress 4lame the administration, is certain to 4e discussed "hen President ;arac%
<4ama visits Meican President Enri=ue Pena Nieto in Meico City on *hursday# Meico immediately ratified the &act in A&ril 7D'7,
4ut the United States has so far 4een una4le to &ass a sim&ly "orded, one?&age la" to &ut the agreement
into force# *he deal, formally %no"n as the *rans4oundary $ydrocar4ons Agreement, &rovides legal
guidelines for dee&"ater drilling in the '#/ million acres -RDD,DDD hectares9 of the Fulf that straddle the U#S#?
Meico 4oundary#
(olvency
1nc solvency
4ong timeframe for solvency 3 large scale investments and regulations
Myers et' Al 1)-!illiam C# Danvers, Staff Director Kenneth A# Myers, .r#, Staff Director U#S# F<XE)NMEN* P)IN*INF
<CCICE ((?/R( !AS$INF*<N 6 7D'7 A MIN<)I*: S*ACC )EP<)* P)EPA)ED C<) *$E USE <C *$E C<MMI**EE <N
C<)EIFN )EBA*I<NS UNI*ED S*A*ES SENA*E O;)!9
A %ey difference 4et"een the uniti@ation agreements envisioned under the *;A and traditional PSAs is that
&hysical 4arrels &roduced "ill 4e allocated to the legal Aurisdictions of the United States and Meico, &resuma4ly in &ro&ortion to
the amount of reserves found on their res&ective sides of the 4order# *he Meican 4arrels, &resuma4ly, "ill 4e &ro&erty of PEMEL
as a state entity and the U#S# 4arrels "ill 4e treated under standard terms of U#S# licensing in the Fulf of Meico# It is unli%ely that,
from the U#S# &ers&ective, the *;A "ill meaningfully increase U#S# domestic oil &roduction in the near term# *he
maritime 4order area is dee& "ater and "ould re=uire massive investments# Such investments
are &ossi4le and should 4e encouraged 4y the U#S# government, ho"ever, it will ta"e years to get t$roug$
regulatory $urdles and normal pro;ect development needs# $o"ever, the *;A "ould unloc% the
maritime 4order region from moratoria, there4y offering long?term o&&ortunities to increase U#S# domestic &roduction# *he *;A
should 4e seen as a net &ositive to hel&ing reduce U#S# de&endence on im&orts from trou4lesome regions and 4oosting domestic
economic activity, and therefore the *;A should 4e vie"ed as a 4enefit for U#S# energy security# ;enefits of &hysical 4arrels of oil
&roduced are &otentially much greater in relative im&ortance on the Meican side of the 4order, "hich is e&eriencing decline in %ey
fields, and that "ould 4e su4stantially 4eneficial to U#S# interests in Meican economic gro"th#
ATA Mexican Relations
1nc Mexican relations
(tatus !uo solves relations
Arc$ibold and ($ear, 13 -)andal C# Archi4old and Michael D# Shear, /010'1, 2<4ama *ells
Meico Audience of Ne" Era in )elations5,
htt&600"""#nytimes#com07D'10D/0DJ0"orld0americas0o4ama?see%s?to?4anish?stereoty&ical?
image?of?meico#htmlUTrZD_&age"antedZ&rint900EM
MELIC< CI*: E President <4ama, s&ea%ing to an enthusiastic cro"d of young &eo&le here, on Criday declared a ne" era
in relations "ith Meico that "ill focus on strengthening the countries> economic ties and that
"ill &lay do"n the 4attle against drug gangs that has dominated the discourse for several years#
$ours after a &rivate dinner "ith President Enri=ue PeMa Nieto of Meico, "ho has made an overhaul of la"s to foster economic
gro"th the highlight of his five?month?old term, Mr# <4ama urged Americans to loo% &ast stereoty&es of
Meican violence and des&air, and em4race the country>s strengthening democracy and
economic health# 2!e agree that the relationshi& 4et"een our nations must 4e defined not 4y
the threats that "e face, 4ut 4y the &ros&erity and the o&&ortunity that "e can create together,5
Mr# <4ama said to vigorous a&&lause 4efore an audience of high school and college students at the National Anthro&ology Museum#
After suggesting a fe" days ago that security relations 4et"een the United States and Meico could 4e 4etter, Mr# <4ama hardly
mentioned the su4Aect in his s&eech or in earlier remar%s on *hursday, a sign the to&ic has given American officials &lenty of
headaches# *housands of &eo&le have 4een %illed in 4attles 4et"een Meican drug gangs and the &olice and military, "hile the flo"
of cocaine and mariAuana flourishes# ;usiness analysts have said Meico>s economy "ould 4e even further along "ithout its violence#
;ut investment has gone for"ard, and the economy is a sunnier su4Aect over allG the United States is Meico>s largest trading &artner
and Meico is the United States> third largest, 4ehind Canada and China# Poverty remains dee& here# Mr# PeMa Nieto ac%no"ledged
this "ee% that three of five Meicans scra&e 4y on informal Ao4s and that "ages have so stagnated that they are no" lo"er than
China>s, contri4uting to a sense among the mem4ers of the &u4lic that they are not yet feeling 2Meico>s moment,5 as the
government slogan "ould have it# ;ut a surge of investment in manufacturing, technology and other sectors has hel&ed lift the
middle class and consumer s&ending and contri4uted to gro"th levels in the national economy that have 4een dou4le those of the
United States in the &ast t"o years# Still, economic and trade tal%s have caused &lenty of friction and disagreements, too# Meican
government officials, in &rivate tal%s "ith Mr# <4ama, homed in on long, costly "aits for truc%s and "or%ers at the international
4order in 4oth directions, 4ut far more severe going into the United States# *he 4ac%u&s gre" significantly "ith the United States
security clam&do"n on the 4order after the attac%s of Se&t# '', 7DD', and 4udget constraints and the &olitical reality of the mood for
tighter 4order security may inhi4it 4uilding ne" or larger stations or adding man&o"er to them# ;ut senior administration
and Meican officials suggested &u4lic?&rivate &artnershi&s could finance renovations# 2*here
"as certainly recognition on 4oth sides that this is something that "e need to focus on,5 said one senior
United States official "ho &artici&ated in the meetings# 2It 4rings together the issue of 4order safety, 4order
security, immigration and trade#5
ATA 0il .ependence
1nc oil dependence
(tatus !uo solvesGs$ale
*arvey, 1) environment corres&ondent -Ciona $arvey, ''0'70'7, 2US can 4ecome "orldIs
4iggest oil &roducer in a decade, says IEA5,
htt&600"""#theguardian#com0environment07D'70nov0'70us?4iggest?oil?&roducer0&rint900EM
*he US can shed its longstanding de&endence on Saudi Ara4ian oil "ithin the net decade,
redra"ing the "orldIs &olitical systems and &otentially leading to runa"ay glo4al "arming# In a re&ort released on Monday, the
"orldIs foremost energy "atchdog, the International Energy Agency -IEA9, said the US "ould 4enefit from so?called
unconventional sources of oil and gas, including shale gas and shale oil, derived from frac%ing O
4lasting dense roc%s a&art to release the fossil fuels tra&&ed "ithin# *hese sources could fuel the USIs energy
inde&endence, and ma%e the country the "orldIs 4iggest oil &roducer 4y 7D'(# ;ut, if &ursued "ith
vigour, they "ould also lead to huge increases in greenhouse gas emissions that "ould &ut ho&es of cur4ing dangerous climate
change 4eyond reach#
ATA nergy .iplomacy
1nc energy diplomacy
nergy .iplomacy fails and undermines credibility
%smayilov 12 - continuity and change in @er4aiAan>s nergy di&lomacy 4y6 Murad Ismayilov, ;a%u
htt&600"""#academia#edu0HDRH'70ContinuityTandTChangeTinTA@er4aiAansTEnergyTDi&lomacy &u4lished a&ril 7Dth 7D'D O
;)!9
Energy di&lomacy has a&&arently failed to create a collateral effect leading to a =uic% resolution to
the conflict over Nagorno?Kara4a%h on terms favora4le to ;a%uG no longer, therefore, does ;a%u vie" energy di&lomacy as a
&anacea for all its &ro4lems# And the "estEno longer vie"ed as an honest and almighty 4ro%erEis no"
seen as either un"illing or una4le to 4ring a4out "hat ;a%u "ould consider a fair resolution to the
conflict# Second, )ussia]s challenge to Feorgia]s territorial integrity in August 7DDH, com4ined "ith
the "est]s demonstrated ina4ility to 4loc% or re&el Mosco" on that &oint, $ave effectively
wor"ed to furt$er undermine t$e credibility of t$e west, in that it served to Aeo&ardi@e 4oth the
"estqs commitment to the regional states] security and territorial integrity and its ca&acity to live u& to that commitment# Not only
did the "est, including the United States, fail to &revent the )ussian assault, 4utEin its aftermathENA*< failed to etend a long?
&lanned invitation for Feorgia to Aoin its Mem4ershi& Action Plan -MAP9 and rather chose to delay the country]s mem4ershi& in the
organi@ation for an indefinite future#
1nc energy diplomacy badGu"raine
4egitimi:ation of Russian nergy .iplomacy strategy causes 7eorgia and &"raine
intervention
Ruff 21-)ussia>s !*< am4itions _ Feorgian anguish Print E?mail May D(, 7DDH May (, 7DDH A4dul )uff a%a 2)uff Stuff5,
Pa%istani <4server htt&600georgiandaily#com0inde#&h&Uo&tionZcomTcontent_tas%Zvie"_idZ'(R/_ItemidZ'17 O ;)!9
)ussia thus used energy di&lomacy to contain the resistance from these essentially anti?)ussian CSU
states# U%raine and Feorgia are s&earheading the fight against )ussian in many "ays irritating
the Kremlin strategists# Strained relations 4et"een )ussia and Feorgia have gro"n steadily "orse in recent "ee%s for geo?
&olitical and !*< reasons# 4ong#standing tensions between Russia and 7eorgia over two
separatist regions in 7eorgia $ave flared dangerously in recent days wit$ eac$
country accusing t$e ot$er of provocative actions t$at ris" war' A4%ha@ia and <ssetia have
4een "ooed 4y )ussia to cede from Feorgia annoying Feorgian government# )ecent re&orts a4out Feorgian forces are &lanning for
an onslaught on these regions have 4een resented 4y Mosco" and "arned of military reaction from the Kremlin# )ussia denied
re&orts late last "ee% that it "as de&loying additional &eace%ee&ing troo&s to A4%ha@ia, 4ut the Coreign Ministry said it
"ould use 2all &ossi4le measures,5 including a military res&onse, to defend its citi@ens that live in the
re&u4lics# Many residents in the re&u4lics have )ussian &ass&orts# )ussia>s strenuous efforts to enter !*< are 4eing 4loc%ed 4y a
fe" of CSU states "ith a vie" to outsmarting )ussia and e&licitly sho" their anger# Negotiators aiming to s&eed u& )ussia>s entry
into the !orld *rade <rgani@ation overcame o4Aections from Feorgia during tal%s in Feneva, after *4ilisi threatened to 4loc%
negotiations 4ecause of Mosco">s decision to 4oost su&&ort for Feorgia>s se&aratist re&u4lics#
&"raine intervention spar"s global nuclear war'
Hingston, Ce4ruary )22E -;rian, Norman Paterson School of International Affairs O CICP, 2U%raine6 A )is% Assessment
)e&ort5, &# htt&600"""#carleton#ca0cif&0a&&0serve#&h&0'7'J#&df?;)!9
)ussia6 )ussia see%s to influence the "ea%ened U%raine, inflaming et$nic#Russian separatism G
Crimea declares inde&endenceG U%raine resists, &erha&s seeing an eternal "ar as a distraction from internal strifeG )ussia
comes to the aid of Crimea0ethnic?)ussians resulting in open warfare 4et"een )ussia and U%raine # *he
!est6 *he !est also suffers from the glo4al recession, 4ut -&erha&s follo"ing a &eriod of in"ard loo%ing &rotectionism9
reali@es that it cannot allo" )ussian success in U%raineG open $ostilities erupt between
Russian and /AT0 forces triggering World War %%% and t$e strong possibility of
nuclear war , or at least the dra"ing in of many other countries#
1nc atA russia rels
Russia wont embrace energy diplomacy 3 5utin statements and public support
prove it wouldn6t be in t$eir interest
Qaffe and (oligo 21-Militari@ation of Energy6 Feo&olitical *hreats to the Flo4al Energy System Amy Myers .affe and
)onald Soligo P )EPA)ED IN C<N.UNC*I<N !I*$ AN ENE)F: S*UD: SP<NS<)ED ;: *$E . AMES A# ; AKE) III I
NS*I*U*E C<) P U;BIC P <BIC: AND * $E I NS*I*U*E <C E NE)F: E C<N<MICS , . APAN M A: 7DDH
htt&600"""#4a%erinstitute#org0&u4lications0IEE.Militari@ation#&df ? ;)!9
)ussia>s current energy strategy a&&ears to have t"o drivers# <ne is to 4uild u& the assets, si@e and
strength of the maAor )ussi an state energy entiti es such as Fa@&rom and )osneft, &rotecting their
&otential cont ri4ution to the )ussian economy and their &o"er against foreign com&etitors# Secondly, )ussia has &ositioned itself
to utili@e its com&arative advantage in energy resources for &olitical and economic ends # A recent
&oll ta%en in )ussia as &art of an academic study on energy and environmen tal issues 4y the )ussian Academy of Science sho"s that
1H &ercent of )ussians surv eyed 4elieve that %ee&ing the status of su&er&o"er for )ussia 4est
meets their individual and family interests more than strengthening democracy and freedom of
s&eech -'7 &ercent9, "ith only economic gro"th mattering more to average )ussians th an enhancing )ussia>s status on the
"orld stage# Bess than 'D &ercent of those su rveyed thought continue d &rivati@ation "as im&ortant, "hile at least a third favored
stat e regulation and su&&ort of 4asic industries# More than RH &ercent felt foreign investment in the oil and gas sector "as 2not
acce&ta4le at all#5 *hus, the Kremlin>s &olicies of dismantling :u%os and sus&ending com&etitive mar%et &rinci&als had 4road &u4lic
su&&ort as did using energy to asse rt its international &osition# Putin>s &rimary focus in his second term "as
domestic, not only on consolidating the &o"er of the )ussian state to &rotect the Kremlin from
&olitically?motivated 4usinessmen 4ut also on guaranteeing Mo sco">s firm gri& on )ussian
energy develo&ment and su&&ly routes# !ith the Fa @&rom ta%eover of maAor )ussian oil firm Si4neft, )ussian
government?controlled and ?o "ned com&anies 4ecame res&onsi4le for a4out one?third of the count ry>s total oil out&ut#
1nc atA saudi prolif
/o (audi 5rolif 3 your aut$ors are alarmists
*obbs and Moran 1) -Dr Christo&her $o44s is a Beverhulme )esearch Cello" at the Centre for Science and Security
Studies "ithin the De&artment of !ar Studies at KingIs College Bondon# !ould a nuclear Iran really trigger a ne" arms race in the
Middle EastU 4y Christo&her $o44s and Matthe" Moran, """#theguardian#com0"orld07D'70dec0'80iran?nuclear?middle?east?
arms?race ?;)!9
*a%e Saudi Ara4ia, for eam&le# Iran has long 4een at &olitical and ideological odds "ith the %ingdom across the Fulf# And at
first sig$t, it seems li"ely t$at (audi Arabia would follow %ran down t$e nuclear
pat$' In Ce4ruary, Saudi officials "ere re&orted as claiming that )iyadh "ould launch a Wt"in?trac% nuclear "ea&ons
&rogrammeW in the event of a successful Iranian nuclear test# An article &u4lished in the Bondon *imes in Ce4ruary PrQ descri4ed a
scenario "here4y Saudi Ara4ia "ould attem&t to &urchase "arheads from a4road "hile also adding a military dimension to its
&lanned civil nuclear &rogramme at home# Boo% more closely, ho"ever, and there is a much stronger case to 4e made
against Saudi nuclearisation# ;eyond the KingdomIs &rimitive nuclear infrastructure O the country lac%s
sufficient e&erience and e&ertise in &ractically all areas of the nuclear fuel cycle O Saudi
Ara4iaIs &olitical and strategic contet does not favour the ac=uisition of nuclear "ea&ons# Crom a
security &ers&ective, the relationshi& 4et"een Saudi Ara4ia and the United States has held firm since the '8JDs, des&ite a num4er of
challenges O most nota4ly the &artici&ation of a num4er of Saudi nationals in the 80'' terrorist attac%s# T$e relations$ip
barters (audi oil for &( conventional arms and an implicit commitment to (audiIs
defence' In recent years, the role of !ashington as the silent guarantor of )iyadhIs security has
gro"n a&ace "ith the structural changes in the Middle East# *he fall of the &ro?Saudi Mu4ara% regime in
Egy&tG &rotests and insta4ility in ;ahrain and :emenG the colla&se of the &ro?Saudi government in Be4anonG and civil "ar in Syria
have u&ended the esta4lished regional order and made )iyadhIs &osition less secure# In this contet, and given the determination of
the United States to &revent nuclear &roliferation in the region, a move 4y Saudi Ara4ia to ac=uire nuclear "ea&ons holds fe"
&ositives for )iyadhIs security calculus# Crom and economic &ers&ective, Saudi Ara4iaIs &olicy outloo% eem&lifies Etel SolingenIs
seminal theory on the relationshi& 4et"een economic li4eralism and nuclear restraint# Solingen argues that &olitical coalitions
favouring the reduction of state control over mar"ets and increased privatisation and
foreign investment 3 are less li"ely to adopt a nuclear posture t$at would
endanger t$eir economic interests' In this regard, Saudi Ara4iaIs em&hasis on facilitating the gro"th of foreign
investment is significant# )iyadh has cultivated etensive trade relations "ith most international
&o"ers, %een to attract foreign investment as a means of reducing over?reliance on oil and gas, increasing em&loyment
o&&ortunities for the local &o&ulation -&o&ulation gro"th of almost t"o &ercent e=uates to a need for some 7DD,DDD ne" Ao4s &er
year9, and reinvigorating the Saudi &rivate sector# T$e ac!uisition of nuclear weapons would $ave far#
reac$ing conse!uences, stalling progress and bringing progressive economic
isolation, t$us drastically c$anging t$e nature of t$e "ingdomIs international trade
relations' SaudiIs interests are 4est served 4y nuclear restraint# In an article &u4lished in the latest issue of *he International
S&ectator, "e argue that there are strong arguments for nuclear restraint in the cases of other regional &layers as "ell# Crom security
guarantees and the &rovision of advanced conventional "ea&ons ? in Decem4er 7D'', follo"ing the United States agreed a V'#(
4illion deal to u&grade Saudi Ara4iaIs Patriot missile defence system, for eam&le O to facilitating increased integration into the
international economy, there are a range of measures that can &ersuade a state to forgo nuclear "ea&ons# Ultimately, many see a
domino?effect as the logical res&onse to Iranian nuclearisation# ;ut "hen the sta%es are this high, it is
im&ortant to loo% at all sides of the de4ate# Crom another &ers&ective, t$ere is substantial evidence to
suggest t$at regional proliferation is not a very li"ely outcome at all'
ATA conomy
1nc economy
($ale boom already solves
($au", 1) -^ain Shau%, R0'10'7, 2Shale 4oom to fuel '#/ million Ao4s 4y 7D'/, study says5,
htt&600"""#chron#com04usiness0article0Shale?4oom?to?fuel?'?/?million?Ao4s?4y?7D'/?
1R17/(7#&h&900EM
* he shale gas 4oom "ill account for nearly '#/ million ne" Ao4s 4y 7D'/, em&loying hundreds of
thousands of "or%ers across JH states even though some com&anies are cutting 4ac% on &roduction, according to a
study released !ednesday# Soaring investment in unconventional gas &roduction accounted for ' million Ao4s in
7D'D and "ill continue to have an effect on the national economy, contri4uting V'8( 4illion to
annual U#S# gross domestic &roduct 4y 7D'/, according to the re&ort 4y research and analysis firm I$S Flo4al Insight# *hat total
"ill increase to V117 4illion 4y 7D1/, according to the re&ort# .o4 gro"th related to unconventional gas &roduction, in 4oth
&roducing and non?&roducing states, "ill increase to 7#J million 4y 7D1/, according to the research#
ATA 5M?
1nc pemex
(tatus !uo solves 5M? liberali:ation
+ulotta* and +respo**, 9 *&artner at King _ S&alding "ho focuses on Batin America AND
**counsel at King _ S&alding "ho focuses on energy -Ken Culotta and .ohn Cres&o, 10H0(,
2MeicoIs Batest Ste& *o"ards Energy Bi4erali@ation5,
htt&600"""#la"1RD#com0articles07D'JD0meico?s?latest?ste&?to"ards?energy?
li4erali@ation900EM
<n .une 7R, 7DDR, the Meican Congress voted a constitutional amendment that altered nearly RH years of
oil and gas &olicy in that country# Since the early t"entieth century, Meico has 4een the country most hostile to &rivate oil
and gas investment in the "orld# !ith the coal 4ed methane amendment, com&rising all of t"o lines of tet,
Meico a&&ears to have made a maAor de&arture from former &olicy, eem&ting coal 4ed
methane -natural gas tra&&ed "ithin underground coal formations9 from eclusive e&loitation 4y the Meican
government# !ith this small change, the Meican congress, for the first time since the "holesale e&ro&riation
of all &rivate oil and gas concessions in the '81Ds, has o&ened the door to direct &rivate &artici&ation in the
e&loitation and develo&ment of Meican natural gas resources#
5artial privati:ation solves 5M? reform
.oao 5eixe (?'/?7D1)G "riter for <il&rice#com Can Enri=ue PeMa NietoIs Energy )eforms Ma%e Meico a MaAor <il E&orterU
htt&600oil&rice#com0Batest?Energy?Ne"s0!orld?Ne"s0Can?Enri=ue?Pea?Nietos?Energy?)eforms?Ma%e?Meico?a?MaAor?<il?
E&orter#html
All oil reserves are state &ro&erty, and Meico has huge &otential, ho"ever, the only com&any,
Petr+leos Meicanos -PEMEL9, "ith the rights for e&loration, &rocessing, and selling of the oil, do not have the
resources to maimise etraction# Since 7DDJ Meican oil out&ut has fallen 4y 7/[, "hich is a &ro4lem as the
government receives nearly a third of its revenue from the oil industry# PeMa Nieto has decided to encourage gro"th
in the sector 4y o&ening it u& to foreign investors, s&ecifically ;ra@il>s Petro4ras# In an intervie" "ith the
Cinancial *imes 4ac% in 7D'' he said that PEMEL 2can achieve mor e, gro" more and do more through
alliances "ith the &rivate sector #5 In order to o&en the industry to &rivate investors such as Petro4ras, PeMa
Nieto must &ass a reform agenda through the nation>s congressG a congress "here his &arty does not hold a
maAority# *his means that he "ill rely u&on su&&ort from o&&osition &arties to gain the necessary t"o?thirds vote
that he needs to achieve his &lans#
0ngoing 5M? reform opens up s$ale and deepwater oil to exploration 3 t$at
solves production issues
Eric Martin and Carlos Manuel Rodrigue:, (?'1?7D1)G re&orters for ;loom4erg ;usiness"ee% in Meico City, Meico
May Cinally Fet a Modern <il Industry htt&600interamericansecurity"atch#com0meico?may?finally?get?a?modern?oil?industry0
<&ening u& the oil sector may 4oost g ross d omestic & roduct 4y as much as D#H &ercent a year ,
according to research firm Ca&ital Economics# Com4ined "ith the discovery of significant amounts of shale
gas in northern Meico, ta&&ing dee&"ater oil could create an era of lo" energy costs for the
country # Inviting outsiders to invest in Peme could also transform the &sychology of 4usiness in
Meico# *o change Peme, PeMa Nieto "ill have to challenge entrenched interests, from the unions to local officials, "ho have all
4enefited from Peme>s largesse# If he succeeds he could tac%le other mono&olies and duo&olies in &o"er generation, telecom, and
ca4le television that ma%e life so e&ensive for Meicans#
)nc no liberali:ation
5emex won6t reformGstructural and political problems
(tratfor 1) glo4al intelligence com&any -2In Meico, <4stacles *o Develo&ing <ffshore <il Cields5 7J de Ce4rero de 7D'7,
htt&600"""#stratfor#com0sam&le0analysis0meico?o4stacles?develo&ing?offshore?oil?fields9 00K:
Peme and the Meican government are under increased &ressure to change the status =uo#
MeicoIs oil &roduction is declining and there is little greenfield e&loration under "ay in Meico# *he Meican
government, "hich relies on oil revenues for a4out 1D?JD &ercent of its income, is most affected 4y the
decline in domestic oil &roduction# Des&ite the danger, inflei4ility resulting from com&etition among the three
main &olitical &arties and &ersistent nationalism surrounding &u4lic o"nershi& of natural
resources ma%e it in the short term# unli%ely that Meico "ill 4e a4le to change its &etroleum
o"nershi& structure It is not even clear if or "hen the Meican Senate "ill a&&rove the agreement signed this "ee%G indeed,
senators are currently &rotesting the "ay the Calderon administration handled negotiations# MeicoIs left?"ing
)evolutionary Democratic Party "ill &ro4a4ly o&&ose the agreement in the Senate, "hile CalderonIs
National Action Party -PAN9 can 4e e&ected to vote for it# $o"ever, the PAN lac%s a maAority in the Senate and "ill have to find
allies in the Institutional )evolutionary Party -P)I9, "hose &residential candidate is currently the frontrunner for the .uly ' election#
Considering electoral com&etition 4et"een the PAN and the P)I, a com&romise on the trans4oundary agreement is unli%ely to occur
4efore the election# *his %ind of deadloc% is eem&lary of the &olitical conditions that have sent
Peme scram4ling for "ays around the constitutional restrictions# *hese include a recent failed attem&t to
ta%e over the 4oard of S&anish energy com&any )e&sol :PC and a 4riefly floated idea to create a third?&arty com&any "ith ;ra@ilian
state?controlled oil firm Peroleos ;rasilieros# Most recently, Peme announced its intention to s&earhead its o"n offshore drilling,
"ith u& to 1D "ells &lanned in the net four years# Fiven the com&anyIs state, such &roAections seem o&timistic#
ATA Manufacturing
1nc manufacturing
Mexican manufacturing dominance inevitable
+oy, 13 -Peter Coy, R07(0'1, 2Cour )easons Meico Is ;ecoming a Flo4al Manufacturing
Po"er5, htt&600"""#4usiness"ee%#com0&rinter0articles0'1D'87?four?reasons?meico?is?
4ecoming?a?glo4al?manufacturing?&o"er900EM
Meico is 4eginning to 4eat China as a manufacturing 4ase for many com&anies des&ite its higher crime rate,
according to a ne" re&ort from ;oston Consulting Frou&# Meico>s gain is a &lus for the U#S# 4ecause Meican factories use four
times as many American?made com&onents as Chinese factories do, says the consulting firm# $ere are Meico>s four %ey advantages6
'# Manufacturing "ages, adAusted for Meico>s su&erior "or%er &roductivity, are li%ely to 4e 1D &ercent lo"er than
in China 4y 7D'/# China>s "ages have soared# *hey "ere a4out one?=uarter as high as Meico>s in 7DDD 4ut are catching u&
ra&idly and "ill 4e slightly higher 4y 7D'/# And la4or &roductivity remains higher in Meico, even though the
ga& is narro"ing# *he crossover &oint "as 7D'7, "hen unit la4or costs in China -i#e#, "ages adAusted for &roductivity9 gre" to
e=ual those in Meico# ;y 7D'/, Meico "ill 4e around 78 &ercent less e&ensive# 7# Meico has more free?trade
agreements than any other country# *he North American Cree *rade Agreement gives Meican goods easy
access to the "orld>s largest mar%et, the U#S#, as "ell as to Canada# ;ut that>s not all# Meico has free?trade
agreements covering JJ countries# *hat>s more than the U#S# -7D &artners9 and China -'H9 com4ined# 1# Meican
manufacturing has a significant advantage in energy costs# Natural gas &rices in Meico are tied
to those of the U#S#, "hich are ece&tionally lo" 4ecause of a glut of su&&ly on the mar%et# China &ays
from /D &ercent to '(D &ercent more for industrial natural gas# Meico also has an edge over China in electricity costs, although
&o"er isn>t as chea& in Meico as in the U#S# J# Industry clusters, es&ecially in autos and a&&liances, are
gro"ing# Meico has develo&ed a national e&ertise in certain industries, "hich ma%es it more
attractive for com&anies to locate or e&and &lants there# ;ecause Meico is a maAor auto manufacturer, H8 of
the "orld>s to& 'DD auto &arts ma%ers have &roduction in the country# *he com&anies are concentrated in five Meican states,
reducing trans&ortation costs# In a&&liances, more than (D manufacturers are in the country, ranging from com&onents ma%ers to
assem4lers of 4oth small and large a&&liances#
+$inese military moderni:ation now
-loomberg, 13 -;loom4erg, 10/0'1, 2China ;oosts Defense S&ending as Military Moderni@es
Arsenal5, htt&600"""#4loom4erg#com0ne"s0&rint07D'1?D1?D/0china?4oosts?defense?s&ending?
as?military?moderni@es?its?arsenal#html900EM
China "ill 4oost defense s&ending 'D#( &ercent this year as the government moderni@es its military
arsenal and ado&ts a more assertive stance in territorial dis&utes "ith its neigh4ors# Military s&ending
is set to rise this year to (JD#R 4illion yuan -V''8 4illion9 from RR8#' 4illion yuan, the Ministry of Cinance said
in a re&ort# China has the second?4iggest military 4udget in the "orld after the U#S#, "hich s&ent nearly si
times more on defense than China last year and is no" cutting those outlays# Defense s&ending as a &ercentage of gross domestic
&roduct remained unchanged in 7D'7 from a year earlier at '#1 &ercent as the country u&grades its fleet of fighter Aets, shi&s and
missiles# *he Communist Party says its moderni@ation doesn>t &ose a threat, "hile .a&an and other nations in the region argue
China has 4ecome more hostile in dis&utes over territory in the resource?rich "aters of the East
and South China seas# 2*he increase is consistent "ith their long?term moderni@ation &lans,5
said *aylor Cravel, a &rofessor at the Massachusetts Institute of *echnology "ho studies China>s relations "ith
its neigh4ors# 2Any time you see a dou4le?digit increase in defense s&ending, es&ecially "hen no4ody else in the region is
gro"ing their 4udget at those rates, it generates aniety and concern#5 U#S# Cuts *he military outlays is in contrast "ith the U#S#,
"here defense e&enditures totaled VR((#7 4illion in inflation? adAusted dollars in 7D'7, do"n 1 &ercent from 7D''# In Decem4er,
congressional negotiators agreed on VRJD#( 4illion in defense s&ending for this year# Automatic s&ending cuts from the so? called
se=uester may trigger further reductions# In the last year, China>s Navy commissioned its first aircraft carrier
and a frigate "ith stealth ca&a4ilities# *he country com&leted its first manned s&ace doc%ing,
launched a home?gro"n satellite navigation system and &rogressed "ith its aerial drone
&rogram# China has also 4oosted its cy4er?"arfare ca&a4ility, according to technology e&erts#
Com&uter?security firm Mandiant Cor&# said in a re&ort last month that the Chinese army is &ro4a4ly the source of hac%ing attac%s
against at least 'J' com&anies "orld"ide since 7DDR# *he Ministry of Defense later said the accusations "ere 2inaccurate and
un&rofessional#5 Fovernment <utlays Defense s&ending rose Aust over '' &ercent last year# As a &ercentage of FDP, defense
s&ending "as '#1 &ercent in 7D'7, the same as in 7D'' and do"n from '#J &ercent in 7DDR# Defense s&ending is &roAected to 4e /#1
&ercent of total government outlays in 7D'1, unchanged from 7D'7 and do"n from /#/ &ercent in 7D'', according to data com&iled
4y ;loom4erg# China and .a&an have traded accusations over islands claimed 4y 4oth sides in the East China Sea# Chinese &rotesters
ransac%ed .a&anese 4usinesses after .a&an &urchased the islands in Se&tem4er# Bast month, .a&an said China used fire?control
radar t"ice on .a&anese targets# Chinese shi&s also 4loc%ed the Phili&&ines last year from ins&ecting Chinese fishing 4oats in a reef
the Phili&&ines calls Panatag Shoal and China refers to as $uangyan Island# *hose moves may have 4ac%fired against China 4y
aligning countries in the region against it, Phili&&ine Coreign Affairs Secretary Al4ert Del )osario said on .an# 'D, after meeting his
.a&anese counter&art, Cumio Kishida# .a&an is &aying 2careful attention5 to the dou4le?digit gro"th in China>s military s&ending,
Chief Ca4inet Secretary :oshihide Suga told re&orters today in *o%yo# 2It is desira4le for China to increase trans&arency in its
defense and military &olicy, including e&enditures#5 Pressing Claims At the same time, China has avoided using its military to &ress
its claims in maritime dis&utes, sending marine surveillance shi&s into "aters surrounding the contested islands "ith .a&an# Some
in the army have also counseled caution# Peo&le>s Bi4eration Army Feneral Biu :uan, the son of former President Biu Shao=i, said in
an editorial in the Flo4al *imes ne"s&a&er on Ce4# J that China>s economic gro"th is in a critical &hase and shouldn>t 4e
interru&ted 4y accidents# China>s official defense 4udget doesn>t include items that other countries "ould count, such as research
and develo&ment and foreign arms ac=uisitions, said *ai Ming Cheung, an associate &rofessor at the University of California, San
Diego# *he 4udget for domestic security "ill increase H#( &ercent to (R8#' 4illion yuan, less than the '7#J &ercent rise last year# China
has s&ent more on internal security than on national defense since 7D'D# Freat Po"er Increased military s&ending
reinforces 2the &erce&tion throughout the region that China is committed to striving for great
&o"er status,5 Denny )oy, a senior fello" at the $onolulu?4ased East?!est Center "hose "or% focuses on Chinese security
issues, said 4efore the 4udget "as announced# China is &lanning to im&rove the trans&arency of its army and "ill hold JD eercises
"ith the military and &aramilitary in 7D'1, $an Ludong, a &rofessor at the University of National Defense under the Peo&le>s
Bi4eration Army, "rote in the Flo4al *imes March '# Even as its 4udget e&ands, the military has also ta%en u& a frugality cam&aign
announced 4y Communist Party Feneral Secretary Li .in&ing# *he army should give &riority to high?tech "ea&ons,
training and information technology, and tighten control over rece&tions, cele4rations and overseas tri&s, the official
Linhua Ne"s Agency said last month, citing a ne" regulation# In a Ce4# 7D re&ort, Linhua said the military had also told
soldiers to recoo% unfinished rice and turn leftover vegeta4les into 2various &ic%les and a&&eti@ers5 to cut do"n on "aste#
+$inese %5R protections increasing
?in$ua, 13 -Linhua, J0'80'1, 2ChinaIs IP) &rotection continues to im&rove6 official5,
htt&600ne"s#inhuanet#com0english0china07D'1?DJ0'80cT'1717187'#htm900EM
;EI.INF, A&ril '8 -Linhua9 ?? China has consistently im&roved its la"s and regulations regarding intellectual
&ro&erty rights -IP)9 and 4oosted IP) &rotection in recent years, an official said Criday# *ian Bi&u, commissioner of the
State Intellectual Pro&erty <ffice, said at the o&ening ceremony of a "ee%?long cam&aign to &romote IP) a"areness that intellectual
&ro&erties granted and registered 4y the office have 4een gro"ing at a fast &ace# WSince the im&lementation of a
national IP) strategy in 7DDH, the countryIs mar%et &layers have 4ecome more ca&a4le of IP)
creation, utili@ation, &rotection and management,W *ian said# Intellectual &ro&erty rights are 4eginning to sho"
their effects in enhancing national core com&etitiveness and transforming the countryIs economic gro"th model, the commissioner
said# Data sho" that the num4er of invention &atents granted 4y the office Aum&ed 7R#' &ercent year on year to
hit 7'(,DDD &atents last year# China also continued to o"n the largest num4er of trademar%s, "ith a total of R#J million effective
registered trademar%s 4y the end of last year, according to *ian#
)nc military moderni:ation onw
+$ina is expanding its military now
*arold, 13 -Scott $arold, associate &olitical scientist for the non&rofit, non&artisan )AND
Cor&oration, 10'70'1, 2China>s defense s&ending mystery5,
htt&600glo4al&u4lics=uare#4logs#cnn#com07D'10D10'70chinas?defense?s&ending?
mystery0900EM
China has once again announced a maAor e&ansion in its defense s&ending, leaving outside o4servers to again
de4ate "hat this all could mean# Unfortunately, the &lanned 'D#( &ercent increase for 7D'1 &osed more =uestions than it ans"ered6
Is it a sign of a more assertive China that "ants to &ursue regional dominanceU Is it an indication of a country see%ing to redress
long?term "ea%nesses in its militaryU <r is it a sign of a domestic leadershi& that can>t say no to the military at a time of &olitical
transitionU *he fact is that it>s a 4it of all of these# In a4solute terms, the official Chinese defense 4udget is slated to rise from
a&&roimately V'DR#J 4illion in 7D'7 to V''8 4illion this year# -*he !hite $ouse, mean"hile, &ro&osed a V//1 4illion 4udget for the
U#S# Defense de&artment in fiscal 7D'79# *his means that, after su4tracting out e&ected inflationary costs, the Peo&le>s Bi4eration
Army "ill have a&&roimately V'7 4illion more in 4udget this year than last# Since the late '8th century,
Chinese nationalists have dreamt of 4uilding a &o"erful military to restore China to a &osition of
&ride in the international system, "ith some ho&ing to go further and achieve a dominant &osition in East Asia# Chinese
analysts can also see that the ca&a4ilities of the U#S# military are in most "ays su&erior to those of China, a situation they &erceive as
even more distur4ing in light of the U#S# 2re4alancing5 to the Asia?Pacific# An enhanced commitment to
strengthening its military serves these internal needs "hile at the same sending a message to the "orld that
China is &re&ared to meet any challenge that may arise from an increasingly com&licated
eternal environment# *o the east and south lie maritime territories claimed or held 4y other states that China ho&es to
claim for itself# *he tightening of U#S# alliance relations across East Asia &oses ne" challenges for China>s military leaders to &lan
against# North Korea>s nuclear &rogram further com&licates matters# More from FPS6 $o" to avoid China?.a&an clash At the same
time, China also needs to devote resources to the tas% of transforming a large, outmoded ground?centric force into a more mo4ile
and net"or%ed military that is also ca&a4le of o&erating in the naval, air, s&ace, electro?magnetic and cy4er domains as "ell# *he
Chinese military is also 4eing called on to &re&are for ne" missions, such as conducting counter?&iracy o&erations off the $orn of
Africa or evacuating Chinese nationals "hen emergencies occur overseas, and these re=uire additional ca&a4ilities and resource
commitments# *he decision to e&and defense s&ending also carries clues a4out the Party>s need to %ee& the military ha&&y, the ne"
leadershi&>s confidence and ne" President Li .in&ing>s a4ility to &ut his o"n stam& on &olicy from the start# Li a&&ears to 4e more
in charge than either $u .intao or .iang ^emin "ere at com&ara4ly early stages in their o"n transitions to &o"er# At a minimum, Li
and his ne" leadershi& team a&&ear to have felt comforta4le enough in their ne" &osts to slo" the gro"th of defense s&ending, even
if they continued to e&and s&ending as a "hole# :et, the Chinese Communist Party>s heavy em&hasis on nationalism as a
Austification for its o"n legitimacy has meant the leadershi& must continue to invest in national defense and ensure that the military
remains satisfied "ith its 4udgetary su&&ort# *he details of ho" ;eiAing &lans to allocate its 7D'1 defense outlays are un%no"n, 4ut
China>s neigh4ors are hungry for ans"ers# If the increased e&enditures are dedicated to ac=uiring &o"er &roAection ca&a4ilities
such as research on ne" "ea&ons systems, im&roved cy4er "arfare a4ilities, &rocurement of more land?attac% missiles and anti?
satellite "ea&ons, ac=uisition of stealthy armed drones, su4marine?4uilding, or &rocurement of air? and sea?lift ca&a4ilities that
could 4e used to invade *ai"an, China>s neigh4ors "ould li%ely 4e anious# In contrast, if such funds are s&ent &rimarily on ground
force moderni@ation and air defenses O systems more defensive in nature O they "ould li%ely 4e less concerned# If such funds go
&rimarily to"ards the construction of im&roved 4arrac%s housing, food, clothing, energy costs and salaries for enlisted soldiers,
sailors, and aviators, the region "ould 4e less "orried still# ;ut the reality is that foreign o4servers are unli%ely to %no" ho" these
funds are s&ent for some time to come, if ever# China>s &olitical system gives little oversight of the military 4udget to legislators, civil
society, or the media, leaving it to the to& leadershi& of the Chinese Communist Party and the Peo&le>s Bi4eration Army alone to
decide ho" defense funds are s&ent and to release only such information on funding allocation as they see fit# *his lac% of
trans&arency and accounta4ility also means some military funds are almost certainly si&honed off in corru&tion# China is
clearly committed to 4uilding a strong and moderni@ed military, es&ecially against a 4ac%dro& of an
increasingly com&le eternal security situation# At the same time, the 4udget increase serves a &arallel goal O that of cementing the
critical 4ond 4et"een the ne" leadershi& and the military#
.efense spending increasing
*ille, 13 -Kathrin $ille, 10/0'1, 2China 4oosts defence s&ending 4y 'D#([5, Pro=uest900EM
China "ill increase its official defence 4udget 4y 'D#( &er cent this year, continuing a nearly
un4ro%en run of dou4le?digit hi%es over the &ast t"o decades# *he government on *uesday said military
s&ending "ould gro" to )m4(7D4n -V''R4n9 in 7D'1# It included the figure in a draft 4udget su4mitted to the National Peo&leIs
Congress, the countryIs ru44er stam& &arliament# $o"ever, the latest increase underscores a trend of slo"er gro"th in Chinese
defence s&ending, in line "ith a slo"er rate of economic gro"th# !en .ia4ao, the outgoing &remier, said China "ould aim for (#/ &er
cent economic gro"th this year ? unchanged from 7D'7 4ut lo"er than &revious targets# ChinaIs gro"ing military ca&a4ilities
have created unease among its neigh4ours and !ashington# Its increasingly assertive stance in
enforcing its vast maritime claims is also alarming countries such as .a&an, the Phili&&ines and Xietnam# Bast "ee%,
for eam&le, ChinaIs first aircraft carrier ? "hich is used for training ? sailed south from its home &ort of Dalian for the
first time, and anchored in 3ingdao, amid an escalating ro" "ith .a&an over a grou& of islands in the neigh4ouring East China Sea,
"hich are claimed 4y 4oth countries#
ATA Add#ons
)nc atA biofuels add#on
t$anol production decreasing
-loomberg, 13 -;loom4erg, '0J0'1, 2Ethanol <ut&ut in U#S# Ca&s Cirst :early Decline Since
'88R5, htt&600"""#4loom4erg#com0ne"s07D'1?D'?DJ0ethanol?out&ut?in?u?s?ca&s?first?yearly?
decline?since?'88R?'?#html900EM
Ethanol &roduction in the U#S# fell 1#7 &ercent to HD(,DDD 4arrels a day last "ee%, ca&&ing the first decline in
'R years as record corn &rices crim&ed &rofits# <ut&ut averaged H/8,DDD 4arrels a day in 7D'7, or '1#7 4illion gallons on an
annuali@ed 4asis, do"n from '1#H 4illion in 7D'', according to ;loom4erg calculations 4ased on an Energy De&artment re&ort today#
Stoc%&iles fell to 7D#7 million 4arrels in the seven days ended Dec# 7H from 7D#1 million# Ethanol is made from corn in the U#S# and
&rices for the grain are at a record for this time of year after a drought scorched cro&s in the Mid"est, data com&iled 4y ;loom4erg
sho"# Im&orts increased to H(,DDD 4arrels a day from 7R,DDD the &revious "ee%, the de&artment said# Ethanol?4lended
gasoline made u& a4out H( &ercent of the total U#S# gasoline &ool, do"n from H8 &ercent in the "ee% ended Dec# 7' and the
lo"est since .an# R, 7D'7# Denatured ethanol for .anuary delivery fell D#' cent to V7#'(H a gallon on the Chicago ;oard of *rade# *he
futures have fallen 7#7 &ercent in the &ast year#
-iofuels decreasing
5er"ins, 11 -)o4ert Per%ins, '70'10'', 2Flo4al 4iofuels gro"th set to slo" on "ea% ;ra@il
&ros&ects6 IEA5, htt&600"""#&latts#com0latest?ne"s0&etrochemicals0Bondon0Flo4al?4iofuels?
gro"th?set?to?slo"?on?"ea%?;ra@il?HR871(H900EM
*he &ace of glo4al 4iofuels &roduction gro"th "ill 4e slo"er than &reviously forecast over the net five years
due to "ea%er &ros&ects for ;ra@ilian ethanol and as the US mar%et 4ecomes saturated, the
International Energy Agency said *uesday# U&dating medium?term forecasts made in .une, the IEA said it sees glo4al 4iofuels
gro"th from 7D'D to 7D'R at Aust JDD,DDD 40d, versus /DD,DDD 40d &reviously# It no" e&ects 4iofuels su&&ly to reach 7#77 million
40d in 7D'R, u& from '#H77 million 40d in 7D'D# ;ra@ilian ethanol &roduction in 7D'' is no" e&ected to decline
4y (/,DDD 40d to 1(/,DDD 40d due to a &oor sugar cane harvest and high sugar &rices, the IEA said# <ver the net five years, the IEA
has reduced its outloo% on average for ;ra@ilian ethanol out&ut 4y an average 'DD,DDD 40d, reaching /1D,DDD 40d in 7D'R#
WChallenging &roduction economics and underinvestment in cane &roduction and ethanol distillery ca&acity
loo%s li%ely to &ersist over the medium term,W the IEA said in its latest monthly re&ort# In the US, ethanol
&roduction gro"th is li%ely to slo" over the medium?term, the IEA said, "ith the year?end e&iry of a J/ cent0gallon
4lenders ta credit set to slo" distillery investment amid increasing saturation in the US mar%et# *he IEA said
US ethanol out&ut is still li%ely to reach 8HD,DDD 40d in 7D'R, in line "ith the )ene"a4le Cuels Standard, 4ut revised do"n its
outloo% 4y an average 7D,DDD 40d over the 7D'7?7D'J &eriod# US 4iodiesel &roduction "as also revised do"n, 4y
'D,DDD 40d on average from 7D'7?7D'R, the IEA said# In Euro&e, *he IEA revised do"n its 4iofuels &roduction estimate 4y 'D,DDD
40d for 7D'D?7D'R, largely due to lo"er 4iodiesel out&ut#
-iofuels decreasing now
0rwel, 1) -Feorge <r"el, J0710'7, 2!ea% Margins Drive Im&erial>s e?;iofuels into
;an%ru&tcy5, htt&600oils&ot7#dtnenergy#com0eTarticleDD7J'1DJD#cfmUZ4'',D,"900EM
e?;iofuels BBC, an Indiana?4ased rene"a4le fuel com&any that>s a su4sidiary of Im&erial Petroleum Inc#, recently filed for
Cha&ter ( 4an%ru&tcy "ith the U#S# ;an%ru&tcy Court for the Southern District of Indiana, and is in the &rocess of "inding do"n
the 4usiness, the com&any>s chief eecutive told *elvent D*N during an intervie" on A&ril 'H# .effrey *# !ilson said e?;iofuels filed
4an%ru&tcy &a&ers on A&ril J, a day 4efore he "as 4rought on 4oard as ne" CE< of the rene"a4le fuels com&any# $e is also
&resident and CE< of the &arent com&any, Im&erial Petroleum# $e said e?;iofuels, "hich &roduced 1D million gallons a year of
ethanol from 7DD( until Aust 4efore the 4an%ru&tcy filing, "as una4le to survive the current economic environment "here4y high
corn &rices and limited demand for fuel ethanol have com4ined to s=uee@e margins for ethanol
&roducers#
%ncreased government investment in biofuels is "ey
Trinder, 11 -Sarah *rinder, ''0'D0'', 2US ethanol needs investment, innovation to overcome
future hurdles5, htt&600"""#icis#com0Articles07D''0''0'D08/D(DD10us?ethanol?needs?
investment?innovation?to?overcome?future?hurdles#html900EM
;A)CEB<NA -ICIS9??*he US ethanol industry needs investment, innovation and commitment from the
government as "ell as regulatory 4odies in order to overcome a num4er of future challenges, a rene"a4le
fuels eecutive said on *hursday# Although US e&orts of ethanol have more than dou4led to an estimated
HR/m gallons0year in 7D'' from JDDm gallons0year in 7D'D, regulations such as the Euro&ean rene"a4le energy directive
-)ED9 and fuel =uality directive -C3D9 could dam&en e&orts, said Ma *homasson, glo4al manager of C$S
)ene"a4le Cuels# $o"ever, it is evident that the num4er of US ethanol &lants certified 4y the International Sustaina4ility and
Car4on Certification -ISCC9 ? a Euro&ean?4ased voluntary scheme "hich certifies 4iomass and 4ioenergy as sustaina4le in
accordance "ith the )ED ? is gro"ing, "ith around '7 &lants a&&roved# *his means around '#'84n gallons of sustaina4le material are
availa4le for e&ort, *homasson said at the C< Bicht !orld Ethanol and ;iofuels conference# Another hurdle the industry faces in
the US is achieving greenhouse gas savings of /D[ 4y 7D'(# *homasson said US ethanol "ill 4e una4le to achieve these targets
unless it changes from corn to a cleaner feedstoc%, such as sugarcane, or &roduces cellulosic ethanol# Increasing cellulosic
&roduction of ethanol, ho"ever, "ould demand a significant investment and e&ansion of cellulosic ethanol ca&acities# $o"ever,
the investment community remains "ary of ethanol due to its volatile margins and feedstoc%
&rices# More fluid mar%et conditions could attract investors 4ut the removal of the US Xolumetric Ethanol and Ecise *a Credit
-XEE*C9 ? a &olicy "hich su4sidises ethanol &roduction in the US ? and the amendment to im&ort tariffs on US ethanol in Euro&e
could lead to mar%et illi=uidity# *his is due to the &ossi4ility that fe"er US im&orts, s&ecifically E8D -8D[ ethanol 4lended gasoline9,
"ill arrive in Euro&e as their &rices "ill no longer 4e as com&etitive "hen com&ared to domestic Euro&ean &roduct# *homasson
4elieves that this "ill result in the need for Euro&ean and ;ra@ilian ethanol &rices to increase in order to attract im&orts from the US
if the movement of &roduct 4et"een countries is to remain fluid# If the US is to overcome these challenges,
*homasson 4elieves that investment, innovation and commitment from the government and
regulatory 4odies "ill 4e %ey#
)nc atA gas $ydrates add#on
(tatus !uo solves researc$, but actual usage is impossible
Ruppel, 11 PhD c MI* in Solid Earth geo&hysics, Fas $ydrates ProAect U#S# Feological Survey
-Carolyn )u&&el, 2Methane $ydrates and the Cuture of Natural Fas5,
htt&600mitei#mit#edu0system0files0Su&&lementaryTPa&erTSPT7TJT$ydrates#&df900EM
Introduction Cor decades, gas hydrates have 4een discussed as a &otential resource, &articularly for countries
"ith limited access to conventional hydrocar4ons or a strategic interest in esta4lishing alternative, unconventional gas reserves#
Methane has never 4een &roduced from gas hydrates at a commercial scale and, 4arring maAor
changes in the economics of natural gas su&&ly and demand, commercial &roduction at a large scale is considered
unli%ely to commence "ithin the net '/ years# Fiven the overall uncertainty still associated "ith gas hydrates as a &otential
resource, they have not 4een included in the EPPA model in MI*EI>s Cuture of Natural Fas re&ort# Still, gas hydrates remain a
&otentially large methane resource and must necessarily 4e included in any consideration of the natural gas su&&ly 4eyond t"o
decades from no"# Des&ite the relative immaturity of gas hydrates )_D com&ared to that for other unconventional gas resources,
the accom&lishments of the &ast decade, summari@ed in detail 4y Collett et al# -7DD89, have advanced gas hydrates along the &ath
to"ards eventual commercial &roduction# *he U#S# De&artment of Energy -D<E9, as directed 4y the Methane $ydrates )_D Act of
7DDD and the su4se=uent Energy Act of 7DD/, has &artnered "ith other government agencies, academe, and industry in field,
modeling, and la4oratory &rograms that have &roduced numerous successes -Doyle et al#, 7DDJG Paull et al#, 7D'D9# *hese
accom&lishments have included the refinement of methods for &re?drill estimation of hydrate saturations and safe com&letion of
logging and coring &rograms in gas hydrate?4earing sediments in 4oth dee&"ater marine and &ermafrost environments# !ithin the
net J years, US federal?industry &artnershi&s are scheduled to oversee advanced logging and direct
sam&ling of resource?grade -high saturation9 gas hydrates in sand de&osits in the dee&"ater Fulf of
Meico and com&letion of a long?term test of &roduction methods on the Alas%an North Slo&e# In .a&an, the
government?su&&orted methane hydrates &rogram -no" called M$7'G *suAi et al#, 7DD89 has also relied on
coo&eration among the &rivate, &u4lic, and academic sectors over &ast decade and &lans to conduct an initial &roduction testing of
resource?grade gas hydrates in the dee&"ater Nan%ai *rough in 7D'7# *he current M$7' effort has gro"n out of earlier advanced
4orehole logging and dee& coring in '888?7DDD -MI*I9 and in 7DDJ -ME*I9, as descri4ed 4y *suAi et al# -7DDJ, 7DD89 and CuAii et al#
-7DD89# Canada has also "or%ed "ith a consortium of &artners to com&lete three maAor drilling &rograms in
the &ermafrost of the Mac%en@ie Delta -e#g#, Dallimore et al#, '888G Dallimore and Collett, 7DD/G Dallimore et al#, 7DDH9# Canada "as
the first country to ever &roduce small volumes of gas from hydrates during short duration -u& to a fe" days9 &roduction tests at
these "ells# Since 7DD/, India -e#g#, Collett et al#, 7DDHG M# Bee and Collett, 7DD8G :un et al#, 7D'D9, Korea -Par% et al#, 7DDHG )yu et
al#, 7DD89, China -^hang et al#, 7DD(G !u et al#, 7DDH9, and &rivate sector interests o&erating offshore Malaysia -$adley et al#, 7DDH9
have also launched maAor, successful dee&"ater hydrate drilling e&editions, and Korea drilled the Ulleung ;asin again in the
second half of 7D'D -S#)# Bee et al#, 7D''9# As 4efits costly e&loration &roAects "ith uncertain short?term &ayoffs, the glo4al effort to
investigate the &otential of gas hydrates as a resource has often 4een carried out "ith significant coo&eration among countries,
su4stantial su&&ort from governments, and maAor leadershi& from 4oth the government and academic research sectors# Even
after more research, %ey challenges are li%ely to remain in locating gas hydrates, assessing the
si@e of the resource, develo&ing via4le &roduction strategies, and understanding the economics
of eventual gas &roduction from gas hydrates "ithin the contet of natural gas su&&ly as a "hole# ;ac%ground
Sometimes du44ed 2methane ice5, methane hydrate is a naturally?occurring fro@en com&ound formed "hen "ater and methane
com4ine at moderate &ressure and relatively lo" tem&erature conditions# Methane hydrates re&resent a highly concentrated form of
methane, "ith a cu4ic meter of ideali@ed methane hydrate containing D#H m1 of "ater and more than 'RD m1 of methane at standard
tem&erature?&ressure conditions# Ethane, &ro&ane, and car4on dioide, and similar gases can also form gas hydrates, and individual
molecules of these gases are often incor&orated into gas hydrates that contain &redominantly methane# ;oth on a glo4al volumetric
4asis and in terms of areal distri4ution, methane hydrates are the most im&ortant ty&e of natural gas hydrate# In contrast to
conventional natural gas, methane hydrates occur only in sediments characteri@ed 4y "ell?%no"n &ressure and tem&erature
conditions, meaning that e&loration activities can 4e strictly limited to s&ecific @ones# *he &ressure?tem&erature conditions
consistent "ith methane hydrate sta4ility are "ides&read on Earth# At &ressure?tem&erature conditions outside the sta4ility @one,
methane is no longer 4ound in 2methane ice5 and eists only as free gas or gas dissolved in &ore "aters# An estimated 88[ of
"orld"ide gas hydrate occurs in ocean sediments, and the a&&ro&riate tem&erature and &ressure conditions &redominate "ithin the
u&&er tens to hundreds of meters of seafloor sediments at "ater de&ths ranging from 1DD to /DD m on the shallo" end to greater
than JDDD m# In theory, methane hydrates are also sta4le on the seafloor and in the "ater column in large s"aths of the "orld>s
oceans# Fas hydrates do not &ersist long in the "ater column, and seafloor gas hydrates are not
significant as a resource# Neither ty&e of gas hydrate "ill 4e discussed in detail here# <nshore, methane hydrates occur
almost eclusively in areas "ith thic% &ermafrost# *he a&&ro&riate tem&erature and &ressure conditions can occur over a @one that is
ty&ically several hundreds of meters thic% and that encom&asses the 4ottom &art of the &ermafrost?4earing section and the to& of
the su4&ermafrost sedimentary section# Des&ite the "ides&read occurrence of gas hydrate, the de&osits are
not u4i=uitous "ithin the gas hydrate sta4ility @one# *he %ey factor limiting gas hydrate formation in most
locations is the lac% of sufficient gas# A lac% of free "ater in sediments can also limit gas hydrate formation, 4ut this situation occurs
almost eclusively in s&ecific geologic settings -very lo" &ermea4ility formations9 or &ossi4ly near the 4ase of the sta4ility @one# *he
amount of methane tra&&ed in gas hydrates remains uncertain# In &re?'88D studies, estimates of the amount of methane tra&&ed in
glo4al gas hydrate de&osits varied 4y many orders of magnitude from e'D'( ft1 or 'D/ trillion cu4ic feet -*CCG McIver, '8H'9 to 'DH
*CC -*rofimu%, '8(19# During the same &eriod, Kvenvolden -'8HH9, Fornit@ and Cung -'88J9, and $arvey and $uang -'88/9
&roduced oft?cited and inde&endently?determined intermediate values# Even "ith the su4stantial increase in data a4out gas hydrate
occurrences since the mid?'88Ds and more so&histicated numerical modeling, estimates of the total volume of gas se=uestered in gas
hydrates have continued to vary, ranging from '#J to '#('D/ *CC -Mil%ov, 7DDJG ;uffett and Archer, 7DDJ9 to J#7'DR *CC -Klauda
and Sandler, 7DD19 "ith some intermediate estimates -'#J'DR *CCG !ood and .ung, 7DDH9 over the &ast decade# In the most recent
revie" of this su4Aect, ;os"ell and Collett -7D''9 concluded that an estimate of 'D/ *CC of methane tra&&ed in gas hydrates -gas?in?
&lace or FIP9 is a reasona4le figure, 4ut they strongly em&hasi@e that the FIP num4er is not meaningful for resource?4ased studies#
Most of the methane included in the FIP estimate is &ro4a4ly tra&&ed in gas hydrates that are &resent in lo" saturations -s'D[ of
&ore s&ace9 in fine?grained, lo" &ermea4ility marine sediments# Such disseminated, lo"?saturation gas hydrate is nearly
im&ossi4le to detect "ithout drilling and is unli%ely to ever &roduce commercial =uantities of
gas# Crom an energy &ers&ective, a more im&ortant figure is the amount of methane tra&&ed in resource?grade de&osits, estimated
at 'DJ *CC in marine settings and several hundred *CC in &ermafrost?associated de&osits -;os"ell and Collett, 7D''9# *his estimate
of FIP in resource?grade methane hydrates is e1/[ more than the 7D'D estimate for glo4al natural gas reserves -eRRDD *CCG EIA,
7D'D9 and nearly 'DD times greater than the annual glo4al consum&tion of gas# It is im&ortant to note that there are as yet no
&roved reserves of gas hydrate since gas has never 4een &roduced from gas hydrate for more
than a fe" days in research tests#
)nc atA oil spills add#on
/o impact to oil spills
+roc"er, 11 -David Croc%er, J01D0'', 2<il S&ills Are Not 2Environmental Catastro&hes55
htt&600"""#4ehind4luelines#com07D''0DJ01D0oil?s&ills?are?not?enviromental?
catastro&hes0900EM
<4viously, oil s&ills are messy and un&leasant O and to 4e avoided# ;ut are they 2catastro&hes5 in the
&erfervid language of contem&orary environmentalism O events causing irre&ara4le or even &ersistent damageU
Clearly not# Cirst, consider some facts# During !orld !ar II, thousands of shi&s "ere sun% and millions
of gallons of oil s&illed# In merchant tonnage alone, the US lost over ',/DD shi&s "ith hundreds more damaged# *he
Fermans san% J7 oil tan%ers off the US east coast and oil fouling the seasca&e "as a fact of life
during the "ar years# Since the "ar, "e>ve seen numerous oil s&ills large and small O "ith "hat resultU In fact, the
oceans see& oil# Peo&le gro"ing u& on the US Fulf coast live "ith tar 4alls "ashing u& on the 4each# Each year, the
e=uivalent of t"o Eon Xalde@es see& into the Fulf O to no effect other than feeding ada&ted
4acteria# So, "hat>s the 4ig deal "ith the ;P s&ill last yearU A&&arently, not much# Crom the Flo4e and Mail6 $ere>s some ne"s
you may not have heard6 <ne year after the "orst oil s&ill in history, the Fulf of Meico is nearly 4ac%
to normal# *hat>s right6 Armageddon didn>t ha&&en# Instead of terri4le harm to the 4ios&here, the
Dee&"ater $ori@on s&ill has caused only mild &ro4lems# In fact, 4ecause of the fishing 4ans
im&osed after the s&ill, there are more fish than ever# Shar% and mac%erel &o&ulations have e&loded# 2)ed sna&&er are
un4elieva4le right no",5 one fisherman said# 2:ou could &ut a roc% on the end a string and they>d 4ite it#5